18th Sep 2025 12:11
(Alliance News) - Stock prices in Europe surged on Thursday afternoon, while the FTSE 100 was only slightly higher after the Bank of England decided against a rate cut, as expected, and slowed the pace of its UK government bond selling programme.
The BoE kept bank rate at 4.00%. It announced it will reduce its stock of UK government bonds by GBP70 billion over the next 12 months, the pace of quantitative tightening slowing from GBP100 billion.
The pound fell to USD1.3643 on Thursday afternoon, from USD1.3661 at the time of the London equities close on Wednesday. It had traded at USD1.3647 before the BoE decision.
The FTSE 100 index rose 8.76 points, 0.1%, at 9,217.13, surrendering some morning progress in the immediate aftermath of the BoE decision. The FTSE 250 rose 46.92 points, 0.2%, at 21,666.73, and the AIM All-Share was up just 0.07 of a point at 771.93.
The Cboe UK 100 was up 0.1% at 923.37, the Cboe UK 250 was 0.2% higher at 18,962.72, but the Cboe Small Companies was 0.2% higher at 17,278.71.
In Paris, the CAC 40 surged 1.1%. In Frankfurt, the DAX 40 powered 1.2% higher.
The Bank of England said seven of its nine-strong Monetary Policy Committee backed the rate hold, including Governor Andrew Bailey. Swati Dhingra and Alan Taylor were the duo that voted against the proposal, preferring a 25 basis point cut to 3.75%.
"There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy. That progress has allowed for reductions in bank rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term," the BoE said.
The euro fell to USD1.1835 midday Thursday from USD1.1847 at the time of the European equities close on Wednesday, while against the yen, the dollar rose to JPY147.27 from JPY146.35.
The BoE decision followed a Federal Reserve rate cut, the US central bank's first of the year.
"The Fed has been watching inflation like a hawk amid a sharp rise in tariffs. So far, inflation hasn't been too problematic, and its attention has shifted to the jobs market which is looking weaker. Financial markets had widely expected a quarter point rate cut, and investors got what they wanted. That's lifted spirits and led to a decent showing across European equity markets, and futures prices imply the US will follow suit later today. Wall Street initially wobbled when the rate cut news was announced yesterday but quickly found its feet," AJ Bell analyst Russ Mould commented.
Federal Reserve Chair Jerome Powell said inflation risks are tilted to the upside, but conversely, the labour market is fighting downside risks.
"A challenging situation," Powell told reporters in a press conference after the decision was announced.
At the conclusion of its two-day meeting, the Federal Open Market Committee voted to lower rates by 25 basis points to the 4.00%-4.25% range.
In New York, the Dow Jones Industrial Average is called up 0.7%, the S&P 500 up 0.8% and the Nasdaq Composite 1.0% higher.
Gold declined to USD3,666.28 an ounce early Thursday afternoon, from USD3,685.67 at the time of the closing bell in London on Wednesday. A barrel of Brent fell to USD67.79 from USD68.04.
Mould added: "Gold pulled back as investors removed some of their 'just in case' positions from portfolios and dialled up the risk. Oil prices also dipped slightly."
The yield on the US 10-year Treasury was quoted at 4.05% midday Thursday London time, widening slightly from 4.04% at the time of the London equities close on Wednesday. The yield on the US 30-year Treasury was quoted at 4.66%, stretching from 4.64%.
In London, retail shares were in focus. Next outlined a cautious outlook for UK trading, Pets At Home reported a profit warning and Primark owner AB Foods fell after a broker downgrade backed its annual guidance but cautioned on a softer UK outlook. Earnings for its first half improved.
"There is another reason to be cautious. The medium to long-term outlook for the UK economy does not look favourable. To be clear, we do not believe the UK economy is approaching a cliff edge. At best we expect anaemic growth, with progress constrained by four factors: declining job opportunities, new regulation that erodes competitiveness, government spending commitments that are beyond its means, and a rising tax burden that undermines national productivity," it warned.
Next shares fell 4.2%.
Pets At Home slumped 13%. It downgraded its profit outlook amid a "subdued" pet retail market. It also announced the immediate departure of its Chief Executive Officer Lyssa McGowan. A search for a permanent replacement has kicked off, while Non-Executive Chair Ian Burke becomes executive chair until one is found.
Pets At Home now expects annual underlying pretax profit in a GBP90 million to GBP100 million range, its outlook lowered from GBP110 million to GBP120 million.
AB Foods declined 0.8%. Davy moved the stock to 'neutral' , believing Primark will suffer with challenging trading conditions "through 2026".
Elsewhere in London, Inspecs fell 7.7%. The eyewear designer has "experienced first-hand the widely reported macro-challenges", including tariff woes and weak consumer confidence.
Inspecs said pretax profit in the half-year to June 30 declined to GBP2.4 million from GBP2.6 million.
Revenue faded 3.0% to GBP97.6 million from GBP100.6 million.
"Current trading in the first two months of H2 is slightly behind plan, however, the growth in our order books and increased cost savings are expected to deliver a stronger performance in the remainder of the year," Inspecs said.
By Eric Cunha, Alliance News news editor
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