The FTSE 100 was a clear outperformer on Thursday as London’s leading index enjoyed a boost from comments by the Bank of England’s governor.
While US equity indices were being dragged lower by Apple after news China is banning government officials from using iPhones, the FTSE 100 rallied on hopes the hiking cycle was near an end.
Speaking to the Treasury Select Committee of MPs, Bank of England Governor Bailey said there were signs inflation would fall dramatically by the end of the year. This would allow the BoE to stop hiking interest rates.
Hopes we could be near peak interest rates sparked a rally in UK stocks, and the FTSE 100 was trading 0.3% higher after reversing a soft start to the session.
A peak in interest rates will be a good thing for equity markets in the short term, but it raises the question of whether good news for stocks is bad news for the economy.
Questions will soon be asked about the reasons behind the fall in inflation and whether softer inflation data will result from slower economic growth.
If this is the case, the stock market rally may prove short-lived. Nonetheless, reaching terminal interest rates will reinvigorate equity bulls in the short term.
The FTSE 100 was 0.3% higher at the time of writing, significantly outperforming the S&P 500, which was 0.6% in the red.
FTSE 100 movers
Melrose was the FTSE 100’s top gainer after 1st half revenues surged and operating profit jumped. The group is solely focused on the aerospace industry after divesting GKN automotive businesses this year.
Melrose shares gained 5% on Thursday, and Rolls Royce moved 3% higher in sympathy.
China-focused stocks were again the worst performers, with Prudential falling 2.8% and miners firmly in the red.