No change to US interest rates; Merlin; IndigoVision; Man U; Faroe
Wall Street had closed higher on Wednesday suggesting that traders expected economic conditions to dictate that it was still not quite right for the Fed to raise rates.
The US central bank said an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade.
It said it wanted to see “some further improvement in the labour market,” and be “reasonably confident” that inflation will increase.
Nick Dixon, investment director at Aegon UK, said: “Global markets will breathe a sigh of relief today, however it merely delays the first upward move. The Fed looks increasingly likely to blink first in the transatlantic race for interest rate lift off and will move in the next few months, while no-flation in Britain delays the Bank of England’s first move until the first half of 2016.”
James Sproule, chief economist at the Institute of Directors said: “The Federal Reserve’s decision to hold interest rates is disappointing. It lacks the bold and necessary steps which must be taken to normalise monetary policy. A small increase would have set us on a path to normalising monetary policy and sent a clear message that the US economy can handle – and in fact, needs – higher interest rates.
“The big question now is how the Bank of England responds. The IoD continues to believe that this prolonged period of ultra-loose monetary policy should be called to an end sooner rather than later. The Bank of England appears reluctant to act before the Federal Reserve. Therefore today’s decision has implications far beyond the United States.”
The decision caused the dollar to fall. David Lamb, head of dealing at the forex specialist Fexco, said: “There are holds, and there are holds with hope. Sadly for Dollarwatchers, the Fed’s surprisingly dovish announcement was firmly in the former category.
“The markets have been left with neither of the things they were hoping for. Neither a rate hike, nor greater clarity on when the rise will come. Dollar bulls had convinced themselves that even if the Fed left rates unchanged, it would at least give some sort of timetable. Some had even wanted such a ‘hawkish hold’ more than a hike.
“Instead they got an overwhelmingly dovish hold. Janet Yellen made clear that the decision to raise rates will not be based on any specific data, and two committee members who had previously called for a 2015 hike have now pushed back the timetable to 2016.
“The Fed’s concerns about the impact of global threats to the US economy have landed like a bucket of cold water on those who were expecting a rate rise before Christmas. As a result the Dollar has gone into freefall – and all bets are off on when the rise will come.
“The prospect of a rise before the end of the year, which had almost seemed a sure thing, is now riding off into the sunset.”
Stephen Jones, chief investment officer at Kames Capital, said: “International pressure is undoubtedly weighing on the Fed’s decision-making process.
“The fundamentals of the US economy, looked at in isolation, are actually robust enough to support slightly higher US interest rates, and the Federal Reserve has acknowledged that in its rhetoric over the past six to eight weeks in the run up to the September meeting.
“What clearly took some influence on their decision though, is the slowdown in emerging market economies and perhaps some uncertainty about what’s happening specifically in China. And weighing all those influences up, they clearly erred on the side of caution and didn’t move. It’s the international scenario that’s definitely influencing their thinking rather than the domestic scenario.”
Merlin Entertainments, owner of Alton Towers, said that following the rollercoaster crash in June which seriously injured four visitors, it expects profits for 2015 to be at the lower end of its previously stated £40-50m guidance – around half the £87m it made in 2014.
For the 36 weeks to 5 September, Merlin’s theme park division suffered an 11.4% decrease in like-for-like revenues as visitors stayed away. The sales impact on the period since the accident on 2 June is likely to be significantly greater than 11%. Its shares eased 0.1p to 382.6p.
Digital CCTV company IndigoVision Group slumped to a loss in the first half of the year as revenue declined in challenging trading conditions.
The Edinburgh company, whose clients include airports, banks and governments, posted a loss after tax of £813,000 compared with a profit of £1.1m in the same period last year as revenue fell from £20.54m to £14.55m.
Sales were lower in Asia Pacific and also declined inLatin America following the rapid reduction in spend by the Brazilian oil and gas market, and as a result of project timing of the safe city projects in Colombia.
The UK market saw a 22% increase in sales to police and safe city projects.
The company said that in line with its policy that dividends relate to earnings and, given the first half loss, it has decided not to pay an interim dividend this year.
Chief executive Marcus Kneen said: “Trading in the first half has been challenging, but Latin America and the Middle East are now starting to show an improving sales trend. The group’s activity is weighted towards enterprise markets where revenues are materially impacted by project timing and the wider economic backdrop, and these factors affected the first half performance.”
Indigo said it has a stronger pipeline of large projects for the second half of the year, mostly from the Middle East and the Americas.
“Although the first half was disappointing, IndigoVision is in a good position to progress in the second half,” said Kneen.
Manchester United suffered after failing to make the Champions League last season.
The club announced revenues of £395.2m for the year to the end of June, an 8.8% fall from the £433.2m made last year. Net income fell from £23.8 to a loss of £1.2m.
Faroe Petroleum has struck oil in the main bore of the Boomerang exploration well at the Pil/Blue discovery in the Norwegian Sea.
The AIM-quoted oil and gas company, which has a 25% interest in the project, said the well encountered good reservoir properties and moveable oil with preliminary estimates of recoverable volumes in the range between 13m and 31m barrels of oil equivalent.
Chief executive Graham Stewart said: “This appraisal and exploration well has provided a significant amount of important data and again proven how prospective the Pil area is. Shares closed down 1p at 70.5p.
Sluggish growth of UK retail sales added to the recent flow of economic data which point to a slowing in the UK economy.
The FTSE 100 ended 42 points down, or 0.68%, at 6,187.