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Central banks give traders reasons to be cheerful

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The FTSE 100 on Thursday wiped out all its losses from earlier in the week (Dominic Lipinski/PA) (PA Archive)
The FTSE 100 on Thursday wiped out all its losses from earlier in the week (Dominic Lipinski/PA) (PA Archive)

Stock markets in London bounced back from a week of malaise on Thursday after the Federal Reserve and the Bank of England whispered encouragement into the ears of global traders.

Financial stocks, including some of the UK’s biggest banks, were among the top risers on the day thanks to a spike at midday as the Bank announced a surprise interest rate hike.

The Bank’s decision makers voted overwhelmingly to more than double rates to 0.25%, from an earlier record low.

The FTSE 100 rose 89.86 points to 7260.61, a 1.3% increase compared with Wednesday’s close. The rise means that the index has recovered all of its losses from earlier in the week.

“The surprise decision by the Bank of England to raise interest rates has built on this narrative, and while the timing is curious, the decision has helped financials to post decent gains, with the likes of Lloyds Banking Group Barclays and HSBC posting decent gains as yields moved higher,” said CMC Markets analyst Michael Hewson.

The Bank of England made a surprise decision to raise interest rates (Yui Mok/PA) (PA Wire)
The Bank of England made a surprise decision to raise interest rates (Yui Mok/PA) (PA Wire)

“A weaker US dollar has also helped boost metals prices, which in turn is helping to lift the basic resource sector, led by Rio Tinto and Antofagasta.”

The news that the Chancellor is meeting with hospitality and leisure businesses also helped airlines, Mr Hewson said.

In the US the S&P 500 index was trading up by 0.1% when markets were closing in Europe, and the Dow Jones was up by 0.4%.

In Germany the Dax closed up 1% and Paris’s Cac 40 rose 1.1%.

In currency markets, sterling dropped 0.1% against rivals in Europe and the US. By the end of trading in London one pound could buy 1.3323 dollars or 1.1778 euros.

On a strong day for many other companies, the FTSE 250 was dominated by Domino’s as the pizza chain franchise said that it had reached an agreement in a long-running dispute.

The company has been locked in a disagreement with some franchise partners for several years, but they now hope to put this behind them with an agreement that the firm will invest £20 million over the next three years.

The franchisees, meanwhile, will agree to speed up their roll-out of more stores. Shares in the business rebounded by 22%.

While Domino’s soared, Boohoo investors were shocked when the company announced that sales would only grow by around half of its previous estimates.

The company had previously told shareholders to expect a 20% to 25% rise in net sales for the full year. But on Thursday it slashed this to between 12% and 14%.

Shares dropped heavily, closing the day down by more than 23%.

The biggest risers on the FTSE 100 were Hargreaves Lansdown, up 63.5p to 1,367.5p, Lloyds, up 2.055p to 46.41p, Standard Chartered, up 16.1p to 430.1p, Ocado, up 62p to 1,697p, and HSBC, up 15.95p to 336.6p.

The biggest fallers on the FTSE 100 were Segro, down 40p to 1,378.5p, United Utilities, down 28p to 1,090p, B&M, down 15p to 616.4p, JD Sports, down 4p to 200p, and British Land, down 7p to 507.8p.

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