FTSE 100 gains as Bank of England raises rates

The FTSE 100 gained on Thursday as the Bank of England raised rates and investors digested the latest comments from Russia that progress towards a ceasefire was ‘wrong’.

European shares had started the day on positive note after the Federal Reserve increased rates, leading to a rally in US stocks overnight.

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The FTSE 100 eked out some gains Thursday morning after the US Federal Reserve moved to raise interest rates for the first time since 2018,” said Russ Mould, Investment Director, AJ Bell.

By the time the Bank of England announced a 0.25% rate hike to 0.75%, the FTSE 100 was trading comfortably higher 7,320, up 0.4%.

However, the pound fell as doubt was cast over the possibility of future rates hikes, despite a revised Bank of England 8% inflation target.

UK Banks

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UK banking shares were marginally lower on Thursday before the Bank of England voted 8-1 to raise rates, but extended losses after the bank changed their language around further rate hikes this year.

In February the bank said it would be ‘likely’ they raised rates again – which they have done today – but they now say there ‘might be’ more rate hikes this year, casting doubt over the trajectory for UK rates.

This means UK banks could miss out on further benefits to their Net Interest Margins in absence of more rate hikes.

Lloyds, Barclays and Natwest shares were down over 2% at the time of writing and continuing their declines.

Ocado

The top fallers included the Ocado Group, declining 8% to 1,106.5p. During the height of Covid-19 Ocado was trading at almost 3,000p per share in September 2020.

The online retailer took a dent to its earnings after it failed to acquire new clients, alongside issues including its patent lawsuit with Norwegian Autostore and a robot fire in its South-East London property.

“The pressure on margins from rising inflation looks to be a growing issue and will not help Ocado at group level given the solutions business remains heavily loss-making,” said AJ Bell investment director Russ Mould.

Diageo rose 2.2% to 3,674.7p after JP Morgan upgraded the stock’s rating from hold to buy earlier today.

Scottish Mortgage Investment Trust continued its upward trajectory after the 7% rebound in the Hang Seng index today saw its major Asian holdings Tencent and Alibaba recover recent losses.

Commodities

Oil prices have once again exceeded the $100 mark to $102 earlier today as a result of the International Energy Agency stating that the sanctions imposed will lead to a loss of 3m barrels a day of Russian oil exports.

Shell and BP shares were up 1% in Thursday morning trade.

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