European stocks were lifted as the Bank of England hinted it is nearing a decision to cut rates.
European stock markets had a spring in their step on Thursday after the UK’s central bank indicated it was inching closer to a potential interest rate cut. London’s FTSE 100 reached a new record high after the Bank of England announced it would maintain interest rates at 5.25% for another month.
The index ended the day 27.03 points up, or 0.33%, at 8,381.35, with mining and housing stocks leading the charge. The Bank’s policymakers instilled a fresh wave of optimism by stating that “things are moving in the right direction”, with inflation predicted to hit the 2% target between April and June.
The Bank also slightly raised its forecast for UK economic growth, and suggested inflation could dip below target in the coming years. “The Bank of England’s latest Monetary Policy Report gave a much-needed positive boost to the UK’s economic outlook,” said Kathleen Brooks, research director at XTB.
“Growth was revised higher, while inflation was revised lower. Although the Bank of England did not confirm that a rate cut would come in June, the governor Andrew Bailey sounded more comfortable with the prospect of rate cuts in the near future.”
“It is also worth noting that Bailey did not rule out a rate cut next month, instead saying that it will depend on the economic data.”
Danni Hewson, AJ Bell’s financial analysis expert, said: “Investors had been treading water ahead of Thursday’s Monetary Policy Committee decision, but as soon as the vote was announced the FTSE 100 surged to a fresh intra-day high. And it was a smorgasbord of sectors feeling the warm balm of those tailwinds.”
European stock markets also enjoyed a robust session on Thursday, with Germany’s Dax climbing 1.02% by the close and France’s Cac 40 ending the day up by 0.69%. Stateside, the S&P 500 saw a modest rise of around 0.25%, while the Dow Jones Industrial Average ticked up by 0.4% as European markets wrapped up.
The British pound initially took a hit against the US dollar following the Bank’s interest rate announcement, but it bounced back in the afternoon, showing a slight increase of 0.1% at 1.251 dollars. Against the euro, sterling dipped roughly 0.1%, trading at 1.161.
In the realm of corporate news, ITV disclosed that last year’s strike by US writers and actors had impacted its production arm’s revenue negatively. However, the broadcaster has seen a recent uptick in advertising revenue and is anticipating a boost from the forthcoming Euros football championship. At the end of the trading day, ITV’s shares were up by 3%.
BAE Systems’ stock also nudged up after the defence heavyweight reported a “strong” operational performance and confirmed it was on course to hit its annual targets. The company highlighted substantial defence expenditure across its various sectors and key markets, with its shares closing 0.8% higher.
The biggest risers on the FTSE 100 were Anglo American, up 82p to 2,736p, JD Sports, up 3.4p to 120.2p, Ocado, up 7.9p to 353.8p, Rightmove, up 12p to 572.8p, and RS Group, up 14.5p to 822.5p. The biggest fallers on the FTSE 100 were 3i Group, down 154p to 2,820p, HSBC, down 29.9p to 690.9p, Melrose Industries, down 9.8p to 595.6p, Pearson, down 15p to 1,000p, and Intercontinental Hotels Group, down 96p to 7,792p.
