FTSE edges into red after Bank of England opens door for rate hike next year

The FTSE 100 closed 5.02p, or 0.07%, lower at 7,078.35p at the end of trading on Thursday.

Bank of England base rate day failed to excite the markets (Ian West / PA)
Bank of England base rate day failed to excite the markets (Ian West / PA)

The Bank of England’s latest interest rate decision failed to excite investors, with the leading index closing the day with little to shout about.

Its decision to hold rates was expected but the suggestion from its Monetary Policy Committee that tightening could happen next year bolstered the pound and restrained London markets.

The FTSE 100 closed 5.02p, or 0.07%, lower at 7,078.35p at the end of trading on Thursday.

Craig Erlam, Oanda’s senior market analyst for UK and Europe said: “The Bank of England is clearly of a similar mindset to its counterpart across the pond, with the central bank today appearing to give the impression that the first hike next year may come sooner than expected.

“The pound is rallying strongly on the back of the announcement, which is weighing on the FTSE, the only major European index in the red.”

A pound was worth 1.374 against the dollar and 1.170 against the euro.

Meanwhile, in Europe the German Dax rose by 0.88% and French Cac closed 0.98% higher as they continued recent rebounds.

In company news, it was a big day for pubs groups, with Fuller’s, City Pub Group and Mitchells & Butlers all reporting results to the stock market.

All three said they are seeing signs of recovery, particularly as workers return to offices, but caution remains over job vacancies.

Shares at Fullers fell by 14p to 716p and City Pub Group dropped by 4p to 116p. Meanwhile, Mitchells & Butlers increased by 5p to 267.8p.

Royal Mail said it expects a strong jump in first-half profits but cautioned over labour shortages and rising costs ahead of the peak festive season.

The company said interim group underlying earnings are set to jump to between £395 million and £400 million – up from £37 million a year ago.

Shares in French Connection surged 3.7p to 26.8p as the struggling retailer revealed it is in takeover talks after receiving an approach worth £29 million from a consortium including its second largest shareholder, Apinder Singh Ghura, as well as Amarjit Singh Grewal and KJR Brothers.

Cinema chain Everyman said it hoped the new James Bond movie would help boost revenues, with admissions at 80% of pre-Covid levels since full reopening of its screens on July 21.

The company remained deep in the red with pre-tax losses of £9.2 million for the six months to July 1, with venues closed for 20 weeks of the half-year. Shares closed 6p higher at 125p.

And sofa business DFS said it could have grown revenue even more than the 47% it reported for the 12 months to the end of June if it were not for the ship that blocked the Suez Canal and shortages of raw materials.

The furniture giant’s shares fell by 6.5p to 261p.

The price of oil continued to climb as the oil majors dropped, amid concerns that continued high demand could pose a problem if production cannot be ramped up.

Brent crude increased by 1.17% to 77.08 dollars per barrel.

The biggest risers on the FTSE 100 were Rolls-Royce, up 4.76p at 126.94p, Lloyds, up 1.08p at 45.06p, Scottish Mortgage Investment Trust, up 25.5p at 1,451p, and Natwest Group, up 3.7p at 217.3p.

The biggest fallers were Entain, down 115p at 2,262p, Polymetal, down 44p at 1,302p, Hargreaves Lansdown, down 35p at 1,404.5p, and Intertek, down 122p at 5,304p.

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