FTSE 100 close: London rallies after Bank of England holds interest rates
London’s FTSE 100 jumped at the close on Thursday in a rally fuelled by the Bank of England holding interest rates in line with expectations, as well as strong results from Shell and BT earlier in the day.
The blue-chip FTSE 100 rose 1.4 per cent to 7,445.24 while the midcap FTSE 250, which is more aligned with the health of the domestic economy, leaped 3.2 per cent to 17,735.52.
The Bank of England has voted to leave interest rates at a 15-year high of 5.25 per cent after inflation remained at 6.7 per cent in September.
The central bank’s forecasts show that higher-for-longer rates will bring growth to a near standstill until the end of 2025, with governor Andrew Bailey ruling out a rate cut any time soon.
“Higher interest rates are working and inflation is falling,” he said. “But we need to see inflation continuing to fall all the way to our two per cent target.
“We’ve held rates unchanged this month, but we’ll be watching closely to see if further rate increases are needed. It’s much too early to be thinking about rate cuts.”
The bank downgraded its forecasts for third-quarter growth and 2024 GDP amid pressure from higher borrowing costs.
“The Bank of England is singing the same tune as the Federal Reserve and has stayed firmly in the ‘wait and see’ chorus, cautious that the full impact of interest rates hikes has yet to be felt,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Although inflation was still more than three times the bank’s target, it’s expected to have taken another big step down in October, and private sector wage growth is also showing signs of easing.”
The US Federal Reserve decided to hold interest rates at a 22-year high on Wednesday in an effort to stabilise prices.
Shell, the largest stock on the FTSE 100 by market cap, rose 4.2 per cent after launching a major buyback and meeting profit expectations.
BT closed 5.4 per cent higher after the UK’s biggest broadband provider posted a second-quarter earnings beat, with outgoing chief executive Philip Jansen noting “predictable and consistent revenue and EBITDA growth”.
Sainsbury’s shares rose 3.8 per cent after it said it expected its full-year profit to be at the top end of expectations, despite posting a 27 per cent decline in statutory profit before tax during the half year.
Online grocer Ocado was the biggest winner on the index on Thursday, surging seven per cent.
The biggest loser was Ladbrokes-owner Entain, which fell nearly six per cent after reporting weak sport revenues and a lower forecast for the year.