Stocks up as BoE follows in footsteps of Fed

(Alliance News) - Stock prices in London were higher at midday Thursday, after the Bank of England followed in the US Federal Reserve's footsteps and left interest rates unchanged.

Sterling was quoted at USD1.2706 shortly after midday on Thursday, higher than USD1.2525 at the London equities close on Wednesday. Before the decision, the pound was trading at USD1.2667.

The FTSE 100 index was up 137.20 points, 1.8%, at 7,685.64. The FTSE 250 was up 501.41 points, 2.7%, at 19,197.17, and the AIM All-Share was up 13.10 points, 1.8%, at 737.20.

The Cboe UK 100 was up 1.8% at 767.57, the Cboe UK 250 was up 3.2% at 16,705.43, and the Cboe Small Companies was up slightly at 14,115.20.

The BoE kept its bank rate at 5.25%. It is the third-successive hold, following one in September, which ended a streak of 14 successive hikes since December 2021, and one in November. The BoE had rapidly shot up the bank rate from a Covid-19-induced low of 0.10%.

It was a split outcome, with six Monetary Policy Committee members, Governor Andrew Bailey included, favouring the hold. Three would have preferred rates to have been lifted by 25 basis points, namely Megan Greene, Jonathan Haskel and Catherine Mann.

The BoE said that since November's meeting, the "advanced-economy government bond yields have fallen materially, including at shorter horizons, and risky asset prices have risen".

"Global GDP growth has been a little stronger than projected in the November Report. Consumer price inflation in the euro area and the United States has declined more quickly than expected. There remain upside risks to inflation given events in the Middle East, although oil and wholesale gas futures prices have fallen," the central bank said.

The BoE decision followed the US Federal Reserve leaving interest rates unchanged on Wednesday.

The decision from the Federal Open Market Committee extends a pause in monetary policy that has been in place since July, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%.

But, it was the economic projections that accompanied the US central bank's statement that grabbed market attention. Notably, projections showed that most Federal Reserve officials forecast that the US central bank could cut rates by around 75 basis points next year.

"While the market was already pricing in rate cuts from 2024, investors welcomed Powell's comments with open arms. Having it spelt out was music to their ears," said Russ Mould, investment director at AJ Bell.

Stocks in New York were called higher on Thursday, extending Wednesday's rally. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.4%.

Still to come on Thursday, the European Central Bank will announce its own interest rate decision at 1315 GMT. A press conference with President Christine Lagarde follows the ECB decision at 1345 GMT.

Markets are expecting the ECB to keep rates unchanged, too.

Ahead of the ECB decision, the CAC 40 in Paris was up 1.4%, while the DAX 40 in Frankfurt was up 0.8%. German stocks reached a record high on Thursday, buoyed by the US Fed forecasts. It soared past 17,000 points.

The dollar softened against other major currencies, as the price of gold jumped.

The euro stood at USD1.0920 around midday Thursday, higher against USD1.0792 at London market close on Wednesday. Against the yen, the dollar was trading at JPY141.47, down sharply compared to JPY145.11.

Gold was quoted at USD2,034.67 an ounce at midday Thursday, higher against USD1,983.30 late Wednesday.

Stocks in London were also boosted by the interest rate decisions, with just a handful of FTSE 100 company's in the red.

At the top of the FTSE 100 index were Ocado, Ashtead Group and Kingfisher, up 8.8%, 7.9% and 7.8%, respectively.

AB Foods lost 1.1% JPMorgan placed its stock on 'negative catalyst watch'. On the other hand, Rio Tinto rose 4.1%, as JPMorgan raised it to 'overweight' from 'neutral'.

Bunzl shares rose 1.4%.

The London-based distribution firm said following its strong performance in recent years, it "expects to deliver another set of good annual results".

Adjusted operating profit for 2023 should be "slightly ahead" of previous guidance, delivering "moderate growth" with a slightly higher operating margin.

Revenue should be "broadly in line with 2022, at constant exchange rates and excluding the impact of the disposal of our UK healthcare business".

In the FTSE 250, Currys rose 8.7%, after it hailed a "solid" performance in the half year ended October 28.

The London-based consumer electronics retailer said revenue fell 6.9% to GBP4.16 billion from GBP4.47 billion the year before, and was down by 4% on a like-for-like basis. This was driven by a decline in sales across all product categories except small domestic appliances, Currys explained.

Pretax loss narrowed to GBP46 million from GBP568 million the year before, as there was no longer a goodwill impairment, compared to the GBP511 million impairment reported in the corresponding six month-period a year ago.

IntegraFin jumped 8.2%.

The London-based group, which operates the investment platform Transact, saw modest revenue growth of 1% to GBP134.9 million for the financial year ended September 30, from GBP133.6 million the year before.

The IntegraFin group's underlying pretax profit dropped 4.3% to GBP63.0 million from GBP65.8 million in 2022. IFRS pretax profit rose 15% to GBP62.6 million, up from GBP54.3 million

Chief Executive Officer Alexander Scott said: "While the external market has been volatile, the UK adviser platform market remains healthy and is expected to grow well over the coming years. We are well placed to take advantage of this market growth, and we remain confident in our market position, despite the uncertainty in the wider economy."

Amongst London's small-caps, abrdn Diversified Income & Growth climbed 7.6%.

In October, the investor had announced a strategic review into the company. On Thursday, it said it plans to wind down the company.

The review sought to address the material discount to net asset value at which its shares have traded and consider how best to deliver shareholder value.

Brent oil was quoted at USD75.66 a barrel at midday in London on Thursday, up from USD73.80 late Wednesday.

By Sophie Rose, Alliance News senior reporter

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