FTSE 100 advances after BoE holds rate, Asian stocks rise but Sensex trades near flatline

BoE stance provides boost to FTSE while US fed report on banks helps Wall Street surge

City workers walk past the Bank of England, in the financial district, also known as the Square Mile, on 24 January, 2017 in London, England (Getty Images)

FTSE 100 edged higher on Thursday helped by the dovish stance of the Bank of England, keeping its crisis-era monetary policy unchanged.

The blue-chip FTSE 100 ended up 0.6 per cent, with drugmaker AstraZeneca and miners Anglo American, Rio Tinto and BHP Group providing the biggest boost to the index. While mining and healthcare-related stocks advanced on the index, cruise operator Carnival fell after posting a quarterly loss of over $2 billion.

Domestically focused mid-cap FTSE 250 dropped 0.5 per cent, following disappointing half-yearly results from engineering and consultancy company Wood that sent the company’s shares tumbling 8.9 per cent to an over one-year low.

All eyes were on the Bank of England meting, where the monetary policy committee decided to keep its benchmark interest rate at an all-time low of 0.1 per cent. However, it warned inflation would surpass 3 per cent, well above its target of 2 per cent, as the economy reopens from coronavirus-related lockdowns.

“As inflation prints continue to come in higher than the central bank’s forecasts anticipate, pressure will increasingly grow to begin on its path to more normal policy,” Ambrose Crofton, global market strategist at JP Morgan Asset Management, was quoted by Reuters as saying.

“All this suggests the bank may end up having to withdraw support more quickly than its international peers.”

“We think that the bank is waiting until its August meeting before it provides a clearer indication as to the future policy path,” Matthew Ryan, CFA, Senior Market Analyst at global financial services firm Ebury told The Independent in a statement.

“At this point, the bank should have a much better idea of both the nature of the inflation spike and the impact of the lockdown unwinding on economic activity. We remain of the opinion that the Bank of England will start raising rates prior to both the Federal Reserve and the European Central Bank, perhaps as soon as the third quarter of 2022,” Mr Ryan said.

Meanwhile, global markets also got a boost as worries over US Federal Reserve’s stand receded. Out of the three major indices on the Wall Street, two index- the S&P 500 and tech heavy Nasdaq Composite hit record highs, while Dow Jones Industrial Average advanced by 322 points or almost 1 per cent.

Releasing its annual stress report, the Fed gave a positive indication for the US banks and their abilities to withstand a recession. It said the 23 institutions in the 2021 exam remained “well above” minimum required capital levels during a hypothetical economic downturn, helping the banking stocks on Wall Street surge.

Bank of America and Wells Fargo rose 1.8 per cent and 2.7 per cent, respectively.

In another indication of the healing US economy, the weekly jobless claims reduced by 7,000 by last week.

On Thursday, media company BuzzFeed announced it will go public through a merger with blank-check company 890 5th Avenue Partners in a deal valuing the online media outlet at $1.5 billion.

Meanwhile, on Friday, the Asia-Pacific stocks jumped higher tracking the gains in the US. Japan’s Nikkei opened over 200 points higher and continues to maintain the levels. The Hang Seng opened positive and surged by over 1.1 per cent in the first half of the trade. Shanghai Composite also surged 1 per cent.

Indian Indices, however, opened flat on Friday despite positive global cues, after heavyweight Reliance declined. In the early trade, Sensex remained near the flatline, while the Nifty opened higher but crashed later.

Additional inputs by agencies