UK stocks gain as BoE keeps interest rates unchanged

by Jonathan Adams
UK stocks

The exporter-focused FTSE 100 jumped 1.4 per cent, while the mid-cap FTSE 250 climbed 3.4 per cent

London stocks climbed on Thursday, driven by rate-sensitive homebuilders and real estate stocks as the BoE kept interest rates unchanged though it also dismissed the probability of rate cuts any time soon.

The exporter-focused FTSE 100 jumped 1.4 per cent, while the mid-cap FTSE 250 climbed 3.4 per cent.

The benchmark FTSE 100 recorded its best day in more than three weeks, while the mid-cap index marked its best session since July.

The BoE held interest rates at a 15-year high of 5.25 per cent and said it did not expect to cut them any time soon as it fights to “squeeze out of the system” the highest inflation among the world’s big rich economies.

Today’s (BoE) communications are hardly suggestive of policymakers looking to conduct further rate hikes, evidenced not only by the fact that the core of the Monetary Policy Committee (MPC) voted for a hold but also by the minutes underlining brewing concerns that the Bank has overtightened, Nick Rees, FX market analyst at Monex Europe, said in a note.

By keeping rates on hold the Bank of England reflected the policy decisions of the U.S. Fed on Wednesday and the ECB last week.

Sterling strengthened against a soft dollar, while prices of benchmark 10-year British bonds increased and were on track for their best day in over a month after the Bank of England decision.

Homebuilder shares increased 2.9 per cent, while real estate stocks surged 6.0 per cent.

Most sectoral indexes closed higher with a series of upbeat corporate earnings also boosting the broader market.

Shares of Britain’s largest broadband and mobile provider BT Group climbed 5.7 per cent after the group’s Q2 earnings came in marginally ahead of forecasts.

Sainsbury’s ended 3.8 per cent higher after the supermarket group said full-year profit would come in at the upper half of its forecast.

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