The FTSE 100 was higher on Thursday as investors reacted to central bank policy decisions, including a hold by the Bank of England who voted 6-3 to keep rates on hold.
London’s leading index extended gains after the decision was announced, trading 0.5% higher at the time of writing.
The decision on Threadneedle Street to keep rates at 3.75% followed a more hawkish approach by the Federal Reserve to the inflationary threat, which increased US borrowing costs overnight for the first time in over three years as policymakers attempt to combat stubborn inflation.
“Inflation is the fever central bankers want to bring down, but the Bank of England is holding off administering the bitter medicine of an interest rate hike,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
Some argue that the energy element of inflation makes interest rate hikes an appropriate tool for tackling inflation, but that didn’t stop the Fed from hinting at another potential increase later this year.
One opponent to interest rate hikes is the US President, who could do without a tightening of financial conditions before midterm elections.
The S&P 500 fell in the immediate reaction to the rate hike, but futures have formed something of a V-shaped recovery since and are trading at levels similar to those just before yesterday evening’s announcement.
Many of the US AI-related stocks that were hit by calls for a slowdown in development earlier this year ripped higher in the US premarket on Thursday, erasing the week’s gains.
The rally in US futures spilt over to Europe, where the FTSE 100 stayed higher shortly after the Bank of England voted to keep rates on hold.
Improved sentiment around AI was reflected in gains for Computacenter on Thursday, which has emerged as London’s leading AI play. Shares were up 1.8% at the time of writing and were the FTSE 100’s top riser.
Other FTSE 100 gainers included Halma, Rolls-Royce, and SSE.
Marks and Spencer was the biggest loser, down 2.8%. JD Sports was also among the top losers, dipping 1.5%.