LONDON: Shares in British banks rallied on Thursday, lifting the blue-chip FTSE 100 after the Bank of England stunned investors with an interest rate hike, the world’s first major central bank to do so since the pandemic hit the global economy last year.
The FTSE 100 gained 1.3%, breaking a six-day slump, while the banks index jumped 3.7% after the BoE raised its main interest rate to 0.25% from 0.1% as it said inflation was likely to hit 6% in April - three times its target level.
Shares in Lloyds Banking Group, Barclays, Standard Chartered and HSBC jumped between 3.8% and 4.6%, topping gains on the blue-chip index.
“The BoE raising rates just the day after the Fed opened the door to market rate hikes next year is showing that even if we have desynchronisation of monetary policy, we are all going in the same direction,” said Roland Kaloyan, head of European equity at Societe Generale.
“The market doesn’t like uncertainty and the fact that it (BoE) is delivering now in line with expectations is quite reassuring.”
Sterling jumped as much as 0.8% against the US dollar , its highest since Nov. 30, and interest-rate sensitive two-year gilt yields rose by more than 7 basis points on the day to 0.56%, their highest since Dec. 1.
The European Central Bank cut stimulus further, while the US Federal Reserve on Wednesday accelerated the tapering of its bond purchases programme, all pointing to a gradual withdrawal of the copious stimulus that has supported the pandemic-hit global economy.
Domino’s Pizza Group jumped to the top of the mid-cap FTSE 250 index after raising its medium-term sales forecast and saying it had reached an agreement with its franchisees over commercial terms for profit-sharing.