20th Mar 2025 17:04
(Alliance News) - The FTSE 100 closed little changed on Thursday as traders weighed a 'hawkish' rate decision in the UK alongside other global monetary policy decisions.
The Bank of England left rates unchanged - and left the door ajar for a similar move in May - following a hold by the Federal Reserve on Wednesday in the US. However, the Swiss National Bank opted for a 25 basis point cut.
The FTSE 100 index closed down 4.67 points, 0.1%, at 8,701.99. The FTSE 250 fell 24.39 points, 0.1%, at 20,097.98, but the AIM All-Share rose 1.22 points, 0.2%, at 695.84.
The Cboe UK 100 ended down 0.1% at 870.29, the Cboe UK 250 eased 0.1% at 17,527.93, and the Cboe Small Companies ended up 0.5% at 15,674.73.
The BoE had earlier pledged a gradual and careful approach to monetary policy as it left interest rates unchanged amid slowing growth and elevated inflation.
At the conclusion of its two-day meeting, the BoE's Monetary Policy Committee voted by a majority of 8 to 1 to maintain bank rate at 4.50%. Swati Dhingra preferred a quarter point cut to 4.25%. A 7-2 vote split had been expected.
"A hawkish set of minutes and the decision to keep bank rate on hold at 4.50%, with only arch-dove Swati Dhingra dissenting, show that the Bank of England is rightly prioritising controlling inflation over the risk to growth from the Oval Office," said Andrew Wishart at Berenberg.
Goldman Sachs said the vote split was "somewhat more hawkish than our expectations; we had expected Dhingra to vote for a larger 50bp cut, and for Mann to dissent in favour of a 25bp reduction."
The MPC said a "gradual and careful" approach to the further withdrawal of monetary policy restraint is appropriate.
"There was no presumption that monetary policy was on a pre-set path over the next few meetings," the MPC added.
Sanjay Raja at Deutsche Bank said the MPC has given itself more flexibility given growing uncertainty around the demand outlook and increasing concern around the near-term inflation outlook.
Deutsche Bank continues to think bank rate will fall, but said the path ahead remains "murky".
"Risks, in our mind, are skewed to a more back-loaded easing cycle, with the risk of a brief pause on the rise," Raja added.
Bank of America continues to expect the next cut in May but "judges that risks are for less cuts than more, and the BoE's cautious hold today increases those risks."
In European equities on Thursday, the CAC 40 in Paris ended down 0.9% while the DAX 40 in Frankfurt closed 1.2% lower.
Stocks in New York were mixed at the London equities close, with the DJIA up 0.1%, the S&P 500 index 0.1% lower, and the Nasdaq Composite down 0.2%.
In contrast, the Federal Reserve's decision in the US to leave interest rates unchanged on Wednesday was viewed as being on the "dovish" side.
Barclays felt the Powell's press conference was more "dovish" than the summary of economic projections which it found "somewhat hawkish".
The SEP showed Federal Open Market Committee members expect two interest rates cuts in 2025, the view unchanged from December, with two further reductions projected in 2026.
But officials lowered forecasts for GDP to 1.7% in 2025 from 2.1% in December and to 1.8% from 2.0% in 2026.
Projections for core PCE inflation, the Fed's preferred inflation measure, rose to 2.8% in 2025 from 2.5% in December. It is then seen falling to 2.2% in 2026 before hitting the Fed's 2.0% target in 2027.
Barclays said it was surprised by Powell's confidence given the unknowns at play.
"Although there are valid reasons to downplay recent jumps in the University of Michigan's 5-10y inflation expectations measure, we were surprised by his dismissal of this indicator, describing longer-term inflation expectations as well anchored. According to Powell, the committee's base case is that tariff-related price increases prove transitory, and he seemed unwilling to entertain tail scenarios in which price pressures might warrant Fed hikes."
Powell said the Fed expects the impact of tariffs on inflation to be "transitory", but accepted that uncertainty around trade policy is "high".
Powell said the central bank was trying to separate the "signal from the noise" as it prepares monetary policy.
Powell said it is "very challenging to unpack" how much inflation will come from tariffs.
But Barclays fears "transitory" rhetoric and dismissal of inflation expectations risks the Fed may be caught "flat footed, as in the pandemic."
"Downplaying risks may, ultimately, undermine credibility for a Fed that appears to be embarking on a very narrow path with two-sided risks at every step," it added.
The pound was quoted lower at USD1.2964 at the London equities close Thursday, compared to USD1.2974 at the close on Wednesday. The euro stood at USD1.0847 against USD1.0883. Against the yen, the dollar was trading lower at JPY148.78 compared to JPY149.87 late Wednesday.
On the FTSE 100, Prudential rose 1.6% after better-than-expected results and strong guidance.
Late Wednesday, the Asia-focused insurer reported strong annual profit growth, boosted by higher insurance revenue with robust performance across key Asian markets.
Adjusted operating pretax profit rose 8% to USD3.13 billion from USD2.89 billion ahead of USD3.05 billion company compiled consensus.
In 2025, Prudential said it expects to grow new business profit, adjusted operating profit EPS, and operating free surplus generated from in-force insurance and the asset management business by more than 10%.
"This strong update addresses investor concerns and should drive re-rating," said analysts at Bank of America.
But Compass fell 3.7% after industry peer Sodexo cut its full-year revenue guidance, mainly due to slower-than-expected organic growth in North America.
For the full year, Sodexo now expects organic revenue growth of between 3% and 4%, down from previous guidance of 5.5% to 6.5%.
On the FTSE 250 Crest Nicholson jumped 7.0% after reporting an encouraging start to the year with early evidence of operational improvements.
The housebuilder said it remains on track to deliver full-year results in line with guidance, with its cash performance tracking better than expected in the first four months.
Shaftesbury Capital rose 6.1% after forming a long-term partnership with Norges Bank Investment Management, the Norwegian sovereign wealth fund, in relation to its Covent Garden estate, in London's West End.
The real estate investment trust, created from the merger of Capital & Counties Properties PLC and Shaftesbury PLC, said it has exchanged contracts for the sale of a 25% non-controlling interest in the Covent Garden estate to Norges.
Shaftesbury will retain 75% ownership and management control over the estate.
The transaction values the Covent Garden estate at GBP2.7 billion, in line with its independent property valuation as at December 31, 2024, the group said.
Brent oil was quoted higher at USD71.89 a barrel at the London equities close Thursday from USD70.72 late Wednesday.
Gold was little changed at USD3,035.20 an ounce on Thursday against USD3,036.51 on Wednesday.
Friday's UK corporate calendar has half-year results from pub chain JD Wetherspoon and first quarter results from cruise operator Carnival.
The economic calendar for Friday has UK public sector net borrowing data, eurozone consumer confidence figures and Canadian retail sales numbers.
By Jeremy Cutler, Alliance News reporter
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