The Bank of England’s decision not to push interest rates into negative territory dominated the news flow and directed markets on Thursday.
The call was widely expected, but the pound nevertheless skyrocketed on the news and pushed shares in London’s top set of companies lower as a result.
The currency had been trading down around 0.4% against the dollar before the midday announcement, which flipped the tables. By the end of the day, sterling was up 0.1% and one pound could buy 1.3662 dollars.
It also saw a post-announcement bounce buying 1.1411 euros by the end of the day, a rise of 0.7%.
Currency traders primarily focused on the indication that a move into negative rates is unlikely this year.
The Bank may have told lenders to prepare in case it needs to push rates into negative territory. But its recognition that they would need at least six months to prepare first seems to have buoyed sterling.
“The bank doesn’t seem likely to introduce negative rates in the near-term, hence the jump in the pound,” said CMC Markets analyst David Madden.
He added: “Andrew Bailey, the BoE boss, doesn’t want to rule out the policy but at the same time, it is only if the situation deteriorates, would the bank contemplate such a move.”
A rise in sterling often has an opposite effect on the heavily export-dependent FTSE 100, and the index did close down 0.1%, or 4.1 points.
However the FTSE’s 6,503.72 close was in fact a little higher than the 6,498 it had been trading at before the Bank’s decision was announced at midday.
A look at global markets revealed why as domestic news had clearly put downward pressure on the index when compared to international peers.
On the continent, the German Dax and French Cac gained 0.9% and 0.8% respectively, while in New York the S&P 500 had gained 0.7% and the Dow Jones 0.9% by the time Europe went home for the day.
In company matters, the news of a £16 billion loss for Shell in 2020 sent its shares down 2%.
BT dropped further though, closing down 3.2% on the news that its revenue had dropped 7% over the last nine months of the year.
Meanwhile shares rallied 4.5% for Compass Group, despite a one third drop in revenue in the last three months of 2020.
And the news that Barratt Developments planned to restart its dividend payments pushed shares up by 2.2%.
Finally a 0.9% share price rise followed the revelation that Watches of Switzerland’s revenue increased 5.7% in the three months to January 24, despite lockdown measures.
The biggest risers on the FTSE 100 were Lloyds, up 1.93p to 36.11p, Natwest, up 8.6p to 163.85p, Compass, up 60p to 1409.5p, Whitbread, up 126p to 3,120p, and IAG, up 4.9p to 153.7p.
The biggest fallers on the FTSE 100 were Unilever, down 269p to 4,067p, Fresnillo, down 34p to 1,000p, BT, down 4.15p to 124.55p, Just Eat Takeaway.com, down 264p to 7,930p, and United Utilities, down 22.6p to 913p.