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LONDON MARKET MIDDAY: BoE keeps bank rate on hold in split decision

1st Feb 2024 12:22

(Alliance News) - London's FTSE 100 was on the up on Thursday afternoon after the Bank of England left interest rates on hold on Thursday, in a split decision.

Sterling was quoted at USD1.2657 shortly after midday on Thursday, lower than USD1.2715 at the London equities close on Wednesday. Before the decision, the pound was trading at USD1.2635.

The FTSE 100 index was up 30.05 points, 0.4%, at 7,660.62. The FTSE 250 was down 49.19 points, 0.3%, at 19,308.76, and the AIM All-Share was up 0.48 of a point, 0.1%, at 755.23.

The Cboe UK 100 was up 0.2% at 765.53, the Cboe UK 250 was down 0.5% at 16756.33, and the Cboe Small Companies was down 0.3% at 14,730.31.

At its February meeting, the BoE kept its bank rate at 5.25%. It is the fourth successive hold, following one in September, which ended a streak of 14 consecutive hikes since December 2021, and two more in November and December. The BoE had rapidly increased bank rate from a Covid-19-induced low of 0.10%.

It was a split outcome, with six Monetary Policy Committee members, Governor Andrew Bailey included, favouring the hold. Two would have preferred rates to have been lifted by 25 basis points, they were Jonathan Haskel and Catherine Mann. One member, Swati Dhingra, preferred to reduce bank rate by 25 basis points, to 5%.

"Since the MPC's previous meeting, global GDP growth has remained subdued, although activity continues to be stronger in the United States. Inflationary pressures are abating across the euro area and United States. Wholesale energy prices have fallen significantly. Material risks remain from developments in the Middle East and from disruption to shipping through the Red Sea," the central bank said.

The BoE's interest rate decision follows the US Federal Reserve's on Wednesday.

At the conclusion of its two-day meeting, the Federal Open Market Committee unanimously voted not to raise the fed funds rate, for the fourth meeting in a row. The key rate is targeted in a range between 5.25%-5.50%, the highest in nearly 23 years.

Speaking after the vote, Powell said a rate cut in March, is not the "most likely case."

"I don't think it's likely that the committee will reach a level of confidence by the time of the March meeting, to identify that March is the time to do that," Powell told reporters at a press conference.

According to the CME FedWatch Tool, there is a 36% chance the central bank lowers the federal funds rate range in March from the current 5.25% to 5.50%. A cut was once the most likely outcome for the March meeting.

Stocks in New York were called higher, the day after the decision. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.6%.

The euro stood at USD1.0797 around midday Thursday, lower against USD1.0846 at London market close on Wednesday. Against the yen, the dollar was trading at JPY146.77, higher compared to JPY146.29.

In the FTSE 100, Shell jumped 2.8% to the top the index.

The London-based oil major said pretax profit plunged to USD1.64 billion in the fourth quarter of 2023 from USD16.44 billion a year prior. Total revenue declined 21% to USD80.13 billion from USD101.20 billion.

In all of 2023, pretax profit fell nearly 50% to USD32.63 billion from USD64.82 billion in 2022, while total revenue dropped 16% to USD323.18 billion from USD386.20 billion.

Shell said the worsened results in 2023 "reflected lower realised oil and gas prices, lower volumes, and lower refining margins, partly offset by higher liquefied natural gas trading and optimisation margins, and higher Marketing margins."

Shell also announced it has completed its USD3.5 billion share buyback and will now launch a new share buyback programme of the same size.

BP was up 0.6%, in a positive read across.

Meanwhile, 3i lost 2.2%.

The London-based investment manager said that its net asset value per share increased 7.8% to 2,034 pence at its December 31 third-quarter end, from 1,886p at September 30. It registered a total return of 18% for the first three quarters, after a negative GBP151 million foreign exchange impact, or 16p per share.

3i Chief Executive Officer Simon Borrows said: "Macroeconomic conditions and global uncertainty are likely to continue to have an impact on selected names within the portfolio but we feel our unrelenting focus on good capital allocation means that 3i is well set for a strong return for the group for this financial year."

In the FTSE 250, Marshalls rose 5.3%. Berenberg raised its stock to 'buy' from 'hold'.

Budget airline easyJet rose 2.2%, after JPMorgan lifted its stock to 'overweight' from 'neutral.'

However, at the other end of the index was Pets At Home, down 3.7%. Berenberg cut its rating to 'hold' from 'buy'.

Over on London's AIM, Bushveld Minerals shot up 56%.

The integrated primary vanadium producer said it has completed the refinancing of its unsecured convertible loan notes issued to OMF Fund III (F) Ltd, which was dated September 29, 2020. It said it has refinanced its convertible debt obligations of USD47.1 million.

Chief Executive Craig Coltman commented: "I am pleased to announce all conditions set out on the definitive agreement with Orion were met and the refinancing transaction is now completed. We thank Orion for their ongoing support towards the company."

In European equities on Thursday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.2%.

Brent oil was quoted at USD81.18 a barrel at midday in London on Thursday, up slightly from USD81.03 late Wednesday. Gold was quoted at USD2,032.22 an ounce, down against USD2,050.57.

Still to come on Thursday's economic calendar, there is the weekly initial jobless claims reading at 1330 GMT.

After that, the next crucial economic release in the US will be Friday's nonfarm payrolls data to be released at 1330 GMT.

By Sophie Rose, Alliance News senior reporter

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