FTSE and pound climb despite Bank of England caution over rate cuts

London’s top index moved 1.33%, or 100.54 points, higher to finish at 7,648.98.

(Yui Mok/PA) (PA Wire)

The FTSE 100 has climbed to its highest level for almost two months, despite caution from the Bank of England over expectations that interest rates will be slashed next year.

Europe’s top markets surged in early trading after they took their cues from the Federal Reserve meeting in the US on Wednesday.

The Fed held rates again but traders were most interested by the fact rate setters were pricing in at least three reductions to borrowing costs next year.

However, unchanged rates from the Bank of England and European Central Bank on Thursday pared back these gains.

Sentiment was partly stifled by the Bank of England’s message that “monetary policy is likely to need to be restrictive for an extended period of time”.

London’s top index moved 1.33%, or 100.54 points, higher to finish at 7,648.98.

The Dax index was 0.08% lower for the day at the close and the Cac 40 closed up 0.66%.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Wednesday night’s Fed interest rate pivot saw a strong start to the day with the Dax and Cac 40 trading up to new record highs, as yields fell sharply across the board.

“These strong gains appear to have run out of steam in the afternoon session, after the ECB and Bank of England pushed back on following a similar rate cut outlook, with the Dax finishing the session lower.

“The FTSE 100, on the other hand, has managed to dodge some of this pushback helped in some part by the sharp falls in yields which are helping to provide a lift to the commercial real estate and housing sector.”

The main US markets followed Wednesday’s rally with modest gains.

The pound was a notable beneficiary of the Bank of England and governor Andrew Bailey’s hawkish tones, with sterling lifting to its highest against the dollar since August.

The pound was up 1.19% at 1.277 US dollars and was 0.11% higher at 1.161 euros at market close in London.

In company news, shares in Currys made strong gains despite the electrical retailer posting a fall in sales.

The firm finished 4.72p higher at 50p after it sharply cut its pre-tax losses from £548 million last year to £46 million this year.

Gambling firm Entain increased in value again on Thursday, continuing positivity after the departure of its boss Jette Nygaard-Andersen on Wednesday.

The Ladbrokes and Coral parent firm climbed by 73.4p to 920p after Corvex Management revealed it had bought a 4.4% stake.

Ocado had a positive session, with shares rising by 74.8p to 718.6p at the retail technology firm after analysts at Goldman Sachs pointed towards growth potential away from its core food sector.

Elsewhere, the price of a barrel of Brent crude rose by 3.6% to 76.93 US dollars (£60.22) as markets were closing in London.

The biggest risers on the FTSE 100 were Ocado, up 74.8p to 718.6p, Ashtead, up 506p to 5,486p, Entain, up 73.4p to 920p, Croda, up 369p to 5,132p, and Anglo American, up 125.2p to 1,795.4p.

The biggest fallers were Relx, down 106p to 3,063p, Admiral Group, down 84p to 2,672p, AB Foods, down 51p to 2,390p, Severn Trent, down 51p to 2,650p, and BAE Systems, down 20p to 1,046p.