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London open: Stocks push higher as Fed hikes rates; BoE in focus
London stocks rose in early trade as investors digested news that the Federal Reserve had hiked rates by 25 basis points as expected, and looked ahead to the latest policy announcement from the Bank of England.
At 0830 GMT, the FTSE 100 was up 0.7% to 7,419.40, while the pound was down 0.1% to $1.2274.
On Wednesday, the Fed lifted the funds rate to between 0.75% and 1.00%. It indicated that further rate rises would be “gradual” and officials stuck to their outlook for two more rate hikes this year and three the next.
Crucial to the market’s reading of the announcement was the central bank’s relatively cautious outlook for the rest of the year, said Spreadex analyst Connor Campbell.
“This meant most of the good vibes went the way of the Dow Jones (with the futures suggesting the index will re-cross 20100 later today), while causing some sharp losses for the dollar. The greenback has taken some ground back against the pound this morning, but is still effectively at its worst price since the 6 March.”
Meanwhile, the Bank of Japan’s policy announcement also went as expected, as it maintained its short-term interest target of -0.1% and a pledge to guide the 10-year government bond yield at around 0% through aggressive asset purchases.
The Bank of England will be up next, with its policy announcement due at midday. Analysts expect the Bank, which cut interest rates to a record low of 0.25% and expanded its asset purchase programme to £435bn in the aftermath of the Brexit vote, to stand pat on policy.
HSBC said the BoE was “decidedly neutral” in its February Inflation Report, revising growth up sharply, but also insisting that the forecast overshoot in inflation was entirely due to the currency, and not domestically generated pressures.
It expects the BoE to remain neutral this month, voting unanimously to keep policy unchanged.
On the corporate front, shares in Anglo American surged on news that Volcan Investments, the family trust of the founder of India’s largest mining company, is investing $2.44bn in the miner.
Other miners such as Antofagasta, BHP and Glencore and were on the front foot amid continued commodity prices, while Fresnillo, Randgold, Hochschild and Acacia were boosted as gold recovered after the FOMC meeting.
International services company Serco Group advanced after announcing that it was named ‘preferred bidder’ to operate the New Grafton Correctional Centre (NGCC) in New South Wales, Australia.
Kaz Minerals rocketed after JP Morgan Cazenove bumped the stock up to ‘overweight’ from ‘neutral’.
OneSavings Bank edged higher after it hiked its dividend 21% as it reported a 29% increase in profit before tax as its loan book accelerated growth in the second half alongside an improvement in the net interest margin.
On the downside, infrastructure group Balfour Beatty fell despite saying it has returned to the black, posting full year pre-tax profits of £8m from a loss of £199m.
Sainsbury’s also retreated after revealing that like-for-like retail revenue fell in the fourth quarter but total group sales rose thanks to a strong showing from Argos.
