London close: Stocks close slightly lower amid interest rate speculation

by Bella Palmer

The UK equity market declined on Tuesday as investors weighed remarks from the Bank of England’s Ian McCafferty and US data. McCafferty, who was the only member of the Monetary Policy Committed to vote for higher interest rates in the past three meetings, said that the BoE should begin raising rates now to ensure gradual and steady path.In a speech at Bloomberg’s headquarters in London, McCafferty said: “If we on the MPC are to achieve our ambition of raising rates only gradually, so as to minimise the disruption to households and businesses of a normalisation of policy after a long period in which interest rates have been at historic lows, we need to avoid getting behind the curve.”

Meanwhile, US data showed construction on new US homes snapped a two-month decline and rose in September.According to the Commerce Department, housing starts climbed 6.5% last month to 1.21m compared with an upwardly revised reading of 1.1m last month, while analysts expected a largely unchanged reading.”Stronger-than-expected housing starts suggest more residential investment,” said analysts at Barclays. “However, much of this activity is likely to show up in construction spending in the fourth quarter. Our third quarter GDP tracking estimate remains unchanged after rounding at 1.2%.”

Elsewhere in the US, Federal Reserve official John Williams said the central bank should raise interest rates in the near future as the economy recovers. Speaking Bloomberg Television with Michael McKee on Monday he said: “My own view is that the economy is still on a good trajectory.”

In the euro-area, a European Central Bank survey showed credit standards for companies eased more than expected in the third quarter as banks used additional liquidity from the ECB’s €60bn a month asset-purchase programme to grant loans.The ECB’s QE programme is under the microscope ahead of the monetary authority’s policy decision and press conference on Thursday.

In company news, Tesco tumbled after separate surveys from Kantar and Nielsen showed the supermarket has lost market share.

Astrazeneca slipped after Credit Suisse cut the company to ‘underperform’ from ‘neutral’ and trimmed its price target to 4,000p from 4,320p, citing a weak overall score for the group in its 2016 PharmaValues Strategic analysis.

Intercontinental Hotels surged after posting a rise in third quarter revenue per available room and expressed confidence in the outlook.

Asos climbed after reporting a better-than-expected increase in full-year pre-tax profit, as UK and international sales grew.

Whitbread jumped after serving up first-half results that beat analysts’ estimates and increased the dividend more than forecast.

Aveva rallied after Berenberg upgraded the engineering software company’s stock to ‘buy’ from ‘hold’ and lifted the price target to 2,450p from 1,977p.

Domino’s Pizza got a boost after Citigroup lifted the stock to ‘buy’ from ‘neutral’ and raised the price target to 1,170p from 760p.

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