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FTSE 100 closes on 14-month high as Britain heads to polls and BOE ups growth forecast

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·4-min read
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HARTLEPOOL, ENGLAND - MAY 06: A man cycles past a polling station as voting begins in the Hartlepool by-election on May 06, 2021 in Hartlepool, England. Today voters in Hartlepool will decide between returning a Labour Party MP, who has held the seat since its creation in 1974, and the Conservative Party candidate who took a number of Labour's so-called
Local and regional elections get under way across the UK. Photo: Ian Forsyth/Getty Images

Stock markets in Europe managed to closed higher on Thursday, after starting on a positive note, slipping into the red in the afternoon, only to recover again at the end of the session.

It came as local and regional elections got under way across the UK and as the Bank of England predicted a bumper year for growth.

In London, the FTSE 100 (^FTSE) closed 0.52% higher, after pushing to fresh 14-month highs, while the French CAC (^FCHI) edged 0.28% higher and the German DAX (^GDAXI) was up 0.17%.

Spreadex analyst Connor Campbell said: "The Bank of England failed to help either the FTSE or the pound this Thursday, though the Monetary Policy Committee (MPC) did provoke a rollercoaster of reactions as it progressed through its various headlines.

The central bank decided to hold its monetary policy unchanged, voting unanimously to keep interest rates unchanged at 0.1%. 

The committee voted 8-1 to maintain its asset purchase facility at £895bn ($1.2tn).

The central bank upgraded forecasts in its quarterly Monetary Policy Report and the Bank now expects the UK economy to grow by 7.25% in 2021. It had previously predicted growth of 5%.

Watch: Asia stocks see a strong start

Read more: 'Good news' as Bank of England predicts bumper year for growth

Today there has also been attention on elections in the UK, with particular focus on the Scottish vote and whether the Scottish National Party (SNP) will be able to obtain a majority to claim the right to hold another referendum on independence.

Analysts have said that a strong victory for the party could put Scottish Independence back on the table which would have a negative effect on investment, as well as creating political uncertainty.

The future risk of a possible UK break-up is likely to hold back the pound against the dollar (GBPUSD=X) and the euro (GBPEUR=X).

“Currency markets have been remarkably sanguine so far about the prospect of such an outcome, and to some extent it's not hard to understand why,” said Michael Hewson of CMC Markets. “This isn’t a problem that is going to go away whatever the outcome of today’s vote.”

On Thursday, the pound was up and down against the dollar as it processed headlines from the Bank of England, before settling on a tepid 0.1% decline.

Read more: What the Scottish election means for the economy, your investments and the pound

Elsewhere cybersecurity firm DarkTrace (DARK.L) rose 5.9% in London as unconditional trading began. Its shares are up more than 30% since its IPO.

The company, which was founded in Cambridge in 2013, uses artificial intelligence (AI) technology to spot cyber threats for businesses.

The listing was one of the most prominent to emerge from the UK’s cluster of tech unicorns – companies with a valuation of at least $1bn (£718m).

On Wall Street, the S&P 500 (^GSPC) climbed 0.30% in New York, and the tech-heavy Nasdaq (^IXIC) fell 0.07%. The Dow Jones (^DJI) edged 0.50% higher at the time of the European close.

US stocks had a lacklustre finish on Wednesday, which saw the Nasdaq and Russell 2000 end the day lower for the second day in a row, even as the Dow made a new record high.

On Tuesday Janet Yellen warned interest rates in the US may have to rise to stop the US economy "overheating".

Yellen walked back her comments later on Tuesday, saying she appreciated the independence of the Fed and didn't see inflation becoming a major problem.

Read more: UK services sector posts fastest growth since 2013 in April

Asian shares were mixed on Thursday amid cautious optimism about upcoming company earnings showing some recovery from the damage caused by the pandemic.

Japan's benchmark Nikkei 225 (^N225) jumped 1.8% in its first session after the Golden Week series of national holidays.

Shares also received a boost from comments from policymakers at the Bank of Japan who expressed resolve to prop up the economy with easy lending and stimulus measures.

Meanwhile, Hong Kong's Hang Seng (^HSI) rose 0.56% while the Shanghai Composite (000001.SS) slipped 0.16%.

The coronavirus vaccine rollout programme is progressing slower in Asia than in the UK, US and in Europe, however, the global recovery is adding to optimism about exports and earnings of companies doing business overseas.

Watch: More work needed to support global economy – Yellen

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