London’s FTSE 100 stocks index edged higher on Thursday, as financial shares rose ahead of a widely expected interest rate hike by the Bank of England, with gains in commodity-linked stocks providing further support.
The blue-chip FTSE 100 climbed 0.4% in early trade, with banks and base metal miners leading the gains, while the domestically focused mid-cap index advanced 0.5%.
With inflation rising to 40-year highs and data showing a drop in the UK unemployment rate below pre-pandemic levels, investors are widely expecting the central bank to lift interest rates by 25 basis points later in the day.
“I think the Bank of England will be akin to the Fed yesterday i.e. acknowledge there is a need to (further) raise interest rates,” Raymond James strategist Chris Bailey said.
“However - as every central bank should do - you have to think beyond today’s inflation level and worry too about tomorrow’s or next year’s.”
The US Federal Reserve raised interest rates for the first time since 2018 on Wednesday and laid out an aggressive plan to push borrowing costs to restrictive levels next year to stamp out inflation.
The banking sub-index rose 0.9%, while base metal miners jumped 0.9%, as the likelihood of more stimulus measures by the top consumer China lifted metal prices.
Providing further boost to the commodity-heavy index, oil majors Shell and BP gained 1.1% and 1.5%, respectively, on the back of stronger crude prices.
Among individual stocks, Cineworld gained 3.2% after the theatre group forecast a better performance this year thanks to pent-up demand and a full movie slate.
Ocado Group and Marks & Spencer both fell 6.7% and 2.6%, respectively, after their joint venture Ocado Retail cut annual sales forecast.
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