Stock prices in London closed in the green on Thursday, following the Bank of England’s decision to cut rates and a hold from the European Central Bank.
In a split vote, the Bank’s Monetary Policy Committee (MPC) voted five to four to reduce interest rates by 25 basis points, which takes the bank rate to 3.75% from 4%.
Five members of the MPC, including Governor Andrew Bailey, supported the cut, judging that upside risks to inflation have continued to recede.
AJ Bell’s Laith Khalaf said: “A Christmas rate cut will bring some much-needed financial cheer to households and businesses across the country, especially those who are battling to keep the show on the road.
“But there were definite signs of hawkishness in the minutes of the MPC meeting.”
Mr Khalaf added: “Inflation is now expected to fall back closer to the 2% target in the spring… But this has failed to significantly move the dial for some members of the rate-setting committee.
“The vote to cut rates was still close, with four members wanting to hold rates at 4%…That suggests they may be worried about a U-shaped trajectory for (consumer price inflation), settling at a rate above 2% in the medium term.”
The analyst concluded: “All in all, the rhetoric and tone of the committee’s minutes look pitched at restraining animal spirits. Despite the rate cut, the Bank remains in cautious mode, wary of both persistent inflation and policy errors.”
The FTSE 100 index closed up 63.45 points, 0.7%, at 9,837.77. The FTSE 250 ended up 160.83 points, 0.7%, at 22,325.59, and the AIM All-Share closed up 4.88 points, 0.7%, at 756.36.
In European equities on Thursday, the CAC 40 in Paris closed up 0.8%.
The European Central Bank (ECB) on Thursday left interest rates unchanged, as expected, amid a brighter economic forecast.
The decision leaves the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility unchanged at 2%, 2.15% and 2.4% respectively.
Quilter Cheviot’s Richard Carter said: “The ECB’s decision to maintain its hold on rates comes as a surprise to no one, and 2026 looks likely to be similarly uneventful unless there is a significant shift in the economic outlook.
“Most economists expect rates to remain unchanged throughout next year, particularly after Christine Lagarde reaffirmed her confidence that current monetary policy is well-positioned.
“While a rate cut cannot be entirely ruled out if inflation continues to surprise on the upside, any movement is likely to be minimal for the foreseeable future.”
The pound was quoted higher at 1.3387 dollars at the time of the London equities close on Thursday, compared to 1.3359 dollars on Wednesday. It had bought 1.3356 dollars just before the Bank’s rate decision.
The euro stood at 1.1730 dollars, lower against 1.1749 dollars. Against the yen, the dollar was trading lower at 155.46 yen compared to 155.55 yen.
Stocks in New York were higher. The Dow Jones Industrial Average was up 0.9%, the S&P 500 index up 1.4%, and the Nasdaq Composite up 1.9%.
The yield on the US 10-year Treasury was quoted at 4.11%, narrowing from 4.17%. The yield on the US 30-year Treasury was quoted at 4.79%, narrowing from 4.83%.
Brent oil was quoted higher at 60.23 dollars a barrel at the time of the London equities close on Thursday, from 59.91 dollars late on Wednesday.
Gold was quoted higher at 4,370.61 dollars an ounce against 4,326.25 dollars.
Back on the London Stock Exchange, Whitbread led the FTSE 100, up 6% after activist investor Corvex Management LP took a more than 6% stake in the Bedfordshire, England-based hotel and restaurant owner.
Corvex said the Premier Inn owner trades at a discount not only to its “fundamental value” but at a discount to the value of its UK freehold hotel portfolio alone, and urged Whitbread to commission a third-party strategic review of its capital allocation priorities.
In response, a Whitbread spokesperson said the company “has a clear strategy and business model, and our five-year plan is designed to deliver strong returns for shareholders through growth in both the UK and Germany”.
Referring to the UK government budget announcement last month, which increased business rates for some properties, the spokesperson said: “We run our business for the long-term but remain flexible and as stated in our announcement on November 28, we are exploring various options to further drive profits, margins and returns in light of the impact of measures in the UK budget.”
BP rose 0.1%. The London-based oil major’s chief executive Murray Auchincloss will step down on Thursday and be replaced by Woodside Energy boss Meg O’Neill.
Carol Howle, current executive vice president, supply, trading & shipping of BP, will serve as interim chief executive until Ms O’Neil joins on April 1 2026.
Ms O’Neill has been chief executive of Woodside Energy since 2021, where she oversaw the acquisition of BHP Petroleum International.
On AIM, Tekmar rose 19%. The technology and services provider for the offshore energy industry announced that it had won a “significant contract award” worth more than 8 million dollars with an existing engineering, procurement & construction customer.
Tekmar will provide its services to a “major UK offshore wind farm”, and said the deal reflects its “track record in delivering reliable, technically robust protection technology”.
Small-cap Topps Tiles lost 6.3%, after the tile retailer went ex-dividend, meaning new buyers do not qualify for the latest payout.
However, its stock is still 14% higher for the year to date.
The biggest risers on the FTSE 100 were Whitbread, up 146.3p at 2,591.3p; Rolls-Royce, up 42p at 1,144p; Rentokil Initial, up 15.8p at 448.5p; Melrose, up 14.8p at 565.4p; and Smiths, up 62p at 2,394p.
The biggest fallers on the FTSE 100 were United Utilities, down 18p at 1,185p; GSK, down 21p at 1,812.5p; Bunzl, down 18.4p at 420.4p; Pershing Square, 36p at 4,932p; and Coca-Cola Europacific, down 50p at 6,88p.
On Friday’s economic calendar, the UK has consumer confidence, retail sales and public sector net borrowing.
On Friday’s UK corporate calendar, Carnival and WH Smith publish their full-year results.
Contributed by Alliance News.
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