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FTSE 100 edges higher after Bank rate hike hammers the pound

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Deputy governor for monetary policy, Ben Broadbent, executive director for communications, James Bell, Governor of the Bank of England, Andrew Bailey, and deputy governor for markets and banking, Dave Ramsden, during the Bank of England’s financial stability report press conference (Yui Mok/PA) (PA Wire)
Deputy governor for monetary policy, Ben Broadbent, executive director for communications, James Bell, Governor of the Bank of England, Andrew Bailey, and deputy governor for markets and banking, Dave Ramsden, during the Bank of England’s financial stability report press conference (Yui Mok/PA) (PA Wire)

FTSE 100 rallied back to positive territory despite the Bank of England’s biggest interest rate hike in 27 years and a frightening outlook for the economy.

The central bank’s Monetary Policy Committee said the economy is set for five consecutive quarters of recession and inflation peaking over 13%.

The pound had been 0.7% higher against the dollar in the run-up to the noon announcement but swiftly saw these gains wiped out over concerns over the size and duration of the economic shock predicted for households.

The pound was down 0.11% against the dollar at 1.212 and was 0.53% lower against the euro at 1.189 at the close.

Weakness in the pound following the economic warning helped to support Britain’s multinational companies as a result.

London’s top index ended the day up 2.38 points, or 0.03%, at 7,448.06.

Chris Beauchamp, chief market analyst at IG, said: “UK stocks have enjoyed a decent bounce off the lows, but Andrew Bailey and co are clearly worried about the economy, and now expect a recession and two years of negative income growth.

“The pound’s slump in the wake of today’s MPC decision underlines the caution investors have regarding the UK economy, and suggests that the pound’s miserable performance thus far in 2022 is unlikely to change for the time being.”

Elsewhere in Europe, equities also shook off recession fears to climb, with the German Dax moving close to two-month highs before dropping back.

The German Dax increased 0.55% by the end of the session while the French Cac lifted by 0.64%.

On Wall Street, the US markets were mixed after a rise in weekly jobless claims and continued concerns over a potential slowdown in the labour market.

In company news, Rolls-Royce shares fell after it said pressures from soaring inflation amid the Ukraine war and supply chain woes are set to continue throughout next year.

The engineering giant saw underlying operating profits more than halve to £125 million for the first six months of 2022, down from £307 million a year ago.

Shares finished the day 8.14p lower at 82.65p.

Glencore made gains after the coal mining firm said it will hand almost 4.5 billion dollars (£3.7 billion) to shareholders.

It came after the group saw earnings more than double in the first half of the year to 18.9 billion dollars (£15.6 billion). Shares closed 13.7p higher at 459.75p

The Gym Group declined by 5p to 174 after the gym operator posted a £4.4 million pre-tax loss over the first six months of the year, although it represented a significant improvement following the impact of the pandemic last year.

Elsewhere, Brent crude oil dipped by 3.14% to 93.72 US dollars per barrel when the London markets closed.

The biggest risers on the FTSE 100 were Entain, up 61.5p to 1,303p, Flutter Entertainment, up 336p to 8,694p, Anglo American, up 88p to 2,866p, Dechra Pharmaceuticals, up 114p to 3,784p, and Glencore, up 13.7p to 459.75p.

The biggest fallers on the FTSE 100 were Rolls-Royce, down 8.14p to 82.65p, Hikma Pharmaceuticals, down 111.5p to 1,650.5p, Mondi, down 81p to 1,529p, Airtel Africa, down 5p to 149.1p, and BT Group, down 5p to 156.2p

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