Britain’s FTSE 100 scaled a record high on Thursday (May 9) after the Bank of England kept interest rates unchanged, but investors cheered increasing indications that more policymakers are warming up to cutting borrowing costs soon.
The benchmark FTSE 100 index rose 0.4 per cent to 8,390.76 points, hitting a new peak, while the mid-cap FTSE 250 reversed course to gain 0.2 per cent.
The pound slipped against the US dollar and was last at US$1.2458. The UK’s benchmark 10-year gilt yield fell marginally and was trading at 4.15 per cent.
The BOE said on Thursday its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25 per cent, after Deputy Governor Dave Ramsden joined Swati Dhingra in voting for a cut to 5 per cent.
The central bank added a line to its post-meeting statement, saying it would be watching the next rounds of economic data closely.
Money markets now see a 77 per cent chance that BOE will cut interest rates in August, compared with 72 per cent before the rate decision.
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“It doesn’t really matter if it’s going to be June or August for the BOE, as long as we know that the worst that the BOE will do is to keep interest rate at current level and not hike,” said Julien Lafargue, chief market strategist at Barclays Private Bank.
Rate-sensitive homebuilders spiked higher, advancing 0.7 per cent, while energy shares gave a 1.2 per cent boost as oil prices gained due falling US crude inventories and an increase in Chinese imports last month.
HSBC Holdings was the biggest drag on FTSE 100 as it traded ex-dividend. Most other big banks listed on the benchmark index were trading higher.
3i Group was one of the bottom performers, falling 4.2 per cent after posting full-year results.
BAE Systems rose 1.1 per cent after the defence firm said it was on track to meet guidance for higher earnings and forecast a “further positive momentum”. REUTERS
