FTSE 100 Live: London markets fall following Bank of England’s interest rate decision
London’s FTSE 100 index fell this afternoon following the Bank of England’s latest interest rate decision, when the Bank’s base rate was lifted by 25 basis points.
The capital’s premier index fell 0.64 per cent to 7,691.42 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, shed 0.45 per cent to 19,187.68 points.
The Bank hiked rates again today as inflation figures have remained persistently higher than its two per cent target. March’s numbers showed that inflation remained in double digits – at 10.1 per cent – where it has been stuck since last summer.
Although investors are hoping this might be the last hike of the cycle, many analysts warn that more pain could be heaped on to households.
Joseph Calnan, corporate FX dealing manager at Moneycorp, said “unless they start looking at other measures such as quantitative tightening, can they justify an end to hikes in the current context?
“The tough reality is that headline CPI inflation has been over 10 per cent year-on-year for the last seven monthly releases. It’s shown signs of reducing, but nowhere near as quickly as the Bank, the Government and consumers would have hoped – and that’s what we need to be paying attention to,” Calnan continued.
On the FTSE 100 Roll- Royce was among the biggest fallers, slipping 2.3 per cent in early morning trading despite a relatively positive trading update.
The iconic engineering firm said it was trading in line with expectations and its turnaround plan, announced in February, was proceeding as planned. It maintained its guidance for the year.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said: “It appears the worst might be over for Rolls. Confidence is flowing, and the group reaffirmed its full-year guidance after four months of trading. But there’s still plenty of work to be done to shore up the balance sheet and put dividends back on the table for investors.”
On the FTSE 250, ITV was down 3.2 per cent. The broadcaster revealed a 10 per cent drop in advertising revenues and warned trading will get tougher in the second quarter as firms rein in marketing spend against a difficult wider economic backdrop.
“Double digit declines in advertising revenue were expected, but these are due to get worse in the new quarter,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown commented.
“That reflects the very real challenges that come with relying on above-the-line spending during times of economic stagnation,” she continued.
The pound was trading 0.29 per cent lower against the dollar at $1.2583/ Analysts at ING argued that today’s MPC meeting would not be too important for the pound.
“We acknowledge that part of GBP’s recent strength has been due to the market’s aggressive expectations about BoE tightening…However, we suspect the BoE will neither offer enough dovish hints today to trigger that dovish repricing, nor enough of a hawkish narrative to match the amount of tightening already priced into the GBP curve,” Francesco Pesole said.