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LONDON MARKET MIDDAY: Bank of England lifts rates by 25 basis points

23rd Mar 2023 12:23

(Alliance News) - Stock prices in London were largely lower at midday on Thursday, raised UK interest rates by 25 basis points on Thursday, as widely expected, and indicated that further tightening in monetary policy may be required.

The FTSE 100 index was down 67.18 points, or 0.9%, at 7,499.66. The FTSE 250 was down 78.73 points, or 0.4%, at 18,679.06, while the AIM All-Share was up just 0.11 of a point at 804.34.

The Cboe UK 100 was down 0.9% at 750.17, the Cboe UK 250 was down 0.4% at 16,246.45, and the Cboe Small Companies was down 0.9% at 16,246.45.

The Bank of England's decision takes the Bank Rate to 4.25%, from 4.00% previously.

The vote was split, with seven monetary policy committee members voting for the enacted rise and two voting for the Bank Rate to remain unchanged.

MPC members Swati Dhingra and Silvana Tenreyro voted against the rise.

Looking forward, the central bank said it will continue to closely monitor indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services inflation.

"If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required," the central bank said.

Sterling strengthened following the decision. The pound was trading at USD1.2303 shortly after the announcement, up from USD1.2287 shortly prior. At the close on Wednesday, the pound was trading at USD1.2228.

The move follows interest rate decisions by the Swiss National Bank this morning, the US Federal Reserve on Wednesday, and the European Central Bank last week.

The Fed raised US interest rates by a quarter of a percentage point resisting the urge to pause hikes in the face of banking sector turmoil, while the SNB raised rates by a more aggressive 50 basis points despite its own financial sector instability in recent weeks. This followed on from the ECB, which raised rates by the same amount last week.

Charlotte de Montpellier and Francesco Pesole said, given the inflationary environment, the SNB's decision was expected.

"The SNB seems to consider that the events linked to Credit Suisse and the threats to financial stability can be managed with other instruments than interest rates, such as liquidity provision," they said. "Like the ECB, the SNB is therefore trying to convince the markets that there is no trade-off between the price stability mandate and the financial stability mandate."

In London, 3i climbed 2.0% after it said its portfolio company, Action, has seen a strong start to 2023. Action is a non-food discount retailer based in Benelux.

The private equity and venture capital company said, in the first 11 weeks of 2023, Action's net sales were at EUR2.09 billion, up 37% from the year prior. 3i also said like-for-like sales growth in the period were up 25%.

Informa dropped 2.4% after Morgan Stanley cut the publishing and exhibitions firm to 'equal-weight', with a price target of 730 pence. The stock is currently trading at 676.20p.

In the FTSE 250, PureTech Health jumped 11% as it announced that Royalty Pharma has acquired an interest in its royalty in Karuna Therapeutics's KarXT schizophrenia treatment.

The clinical-stage biotherapeutics company said Royalty Pharma's interest was acquired for up to USD500 million.

PureTech said Royalty Pharma will receive a 3% royalty from Karuna on sales up to USD2 billion annually, after which Royalty Pharma will receive 33%, and PureTech will retain 67% of royalty payments.

Inchcape dropped 13% despite saying it delivered "another great set of results" for 2022, noting robust customer demand following a prolonged period of supply shortages, which drove growth in both revenue and profit.

The car dealership said pretax profit jumped to GBP399.7 million in 2022 from GBP181.3 million in 2021, while revenue from continuing operations climbed 18% to GBP8.13 billion from GBP6.90 billion.

Elsewhere in London, Gulf Keystone Petroleum climbed 3.7% after it reported that higher oil price and production allowed it to generate "record" profitability in 2022.

The Iraq-focused oil field operator posted a pretax profit of USD265.8 million in 2022, up from USD163.7 million in 2021.

Revenue for the year totalled USD460.1 million, up from USD301.4 million the year prior, as the company's average realised price per barrel jumped 49% to USD74.1 from USD49.7 the year prior.

On AIM, Osirium Technologies plunged 16% as the cloud-based cybersecurity and IT automation software vendor saw its pretax loss widen to GBP3.6 million in 2022, from GBP3.4 million in 2021.

The firm explained the increased loss is due to expenditure levels returning to a more normal level. The main expenditure of the business reflected "significant investment in headcount and activity levels in the business's sales, pre-sales, marketing and engineering departments", Osirium said.

Revenue, meanwhile, increased to GBP1.9 million from GBP1.5 million, in-line with its recently upgraded market expectations.

In European equities on Thursday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.6%.

The euro stood at USD1.0871 midday Thursday, higher against USD1.0702 at the London equities close on Friday. Against the yen, the dollar was trading at JPY131.36, lower compared to JPY132.67.

Stocks in New York were called higher. The Dow Jones Industrial Average was called 0.2%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.9%.

Brent oil was quoted at USD76.27 a barrel at midday in London on Thursday, up from USD76.04 late Wednesday. Gold was quoted at USD1,977.30 an ounce, higher against USD1,948.59.

Still to come in Thursday's economic calendar, the US weekly unemployment insurance claims report is released at 1230 GMT.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

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