The FTSE 100 was lower on Thursday after the Bank of England kept interest rates on hold at 4.5% and signalled they would take a ‘gradual and careful’ approach to cutting rates in the future.
London’s leading index was trading down 0.2% at the time of writing.
The decision to keep rates on hold was to be expected and had little influence on markets. However, investors may have hoped for a more dovish tone to the accompanying commentary, which suggested inflation was still preventing the BoE from cutting interest rates, despite growing macro threats.
“Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further,” the Bank of England said in its Monetary Policy Summary.
The reaction in London was very different from US stocks’ reaction to the Federal Reserve’s overnight instalment, where markets rallied following the Fed’s interest rate decision.
Equity investors were little interested in the Fed’s decision to keep rates on hold and the forecast of just two rate cuts this year. They were more impressed by the Fed’s plan to slow the pace of bond sales in their “quantitative tightening” program.
Indeed, US stocks had the best ‘Fed day’ since July yesterday.
Away from the central bank action, Prudential provided a positive assessment of their recent developments, including a strong outlook and reasonable profits, sending share higher by 1%.
“Asian insurance focused Prudential has not only delivered the profit growth it promised but also exceeded expectations with a stronger-than-expected dividend,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“The Prudential appeal is starting to come through, with Insurance penetration rates in Asia still low and growing demand for long-term savings and protection products. The outlook set a positive tone too, with a 10% jump expected across pretty much every key metric, including the important dividend.”
Pearson was among the top fallers after UBS slashed their price target from 1,580p to 1,460p.
3i was the top faller after announcing sales at its portfolio company Action would grow slower than expected due to IT issues.