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(Alliance News) - Stocks in London were higher at the close on Thursday after the Bank of England lifted interest rates by another 50 basis points, as expected, and tempered its guidance for future hikes.
The FTSE 100 index closed up 59.05 points, or 0.8% at 7,820.16 on Thursday. The FTSE 250 ended up 716.15 points, or 3.6%, at 20,614.69. The AIM All-Share closed up 15.54 points, or 1.8%, at 888.76.
The Cboe UK 100 ended up 0.7% at 781.59, the Cboe UK 250 closed up 3.4% at 17,976.95, and the Cboe Small Companies ended up 1.0% at 13,765.05.
Thursday's rate lift takes the benchmark bank rate to 4.00% from 3.50%. It was an outcome expected by the market, according to consensus cited by FXStreet.
The BoE said seven of the policy setting Monetary Policy Committee backed the move. Swati Dhingra and Silvana Tenryro opposed the hike, preferring bank rate to be maintained at 3.50%.
The central bank removed the word "forcefully" from its forward guidance statement. Though it said a "further tightening in monetary policy" may be needed if inflation accelerates.
Governor Andrew Bailey told reporters in a press conference: "The change in language reflects a turning in the corner, but it is very early days. If the economy evolves in line with the central forecast, we will need to re-evaluate."
Laith Khalaf at AJ Bell said that, for now, the central bank looks like it is erring on the side of caution when it comes to inflation.
"Assuming inflation falls back this year, the MPC is likely to face increasing calls to loosen monetary policy, and indeed longer term forecasts show base rate falling back. The good news is, the Bank is now in a much better position to stimulate the economy by cutting interest rates than it was when interest rates were close to zero," Khalaf added.
For analysts at ING, meanwhile, "below-target inflation forecasts, more muted language on future tightening, and a warning about the impact of past rate hikes, all signal that Bank Rate is close to peaking."
The pound was quoted at USD1.2276 at the London equities close on Thursday, down from USD1.2315 at the close on Wednesday.
In European equities on Thursday, the CAC 40 in Paris ended 1.3% higher, while the DAX 40 in Frankfurt ended up 2.2%. Earlier in the day, the DAX surged to an 11-month high.
The European Central Bank also raised interest rates in the eurozone by 50 basis points, in line with market expectations, but pencilled in another increase in March.
Thursday's hike takes the interest rate on the main refinancing operations, and the interest rate on the marginal lending facility, and the deposit facility to 3.00%, 3.25% and 2.50%, respectively.
The ECB said that looking ahead it expects to raise interest rates further.
In view of underlying inflation pressures, it said, the Governing Council intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March and it will then evaluate "the subsequent path of its monetary policy".
"There is still ground to cover... [we are] not done," Lagarde told reporters in a press conference.
The euro stood at USD1.0927 at the European equities close on Thursday, higher against USD1.0919 at the same time on Wednesday. Prior to the ECB announcement, however, the euro was trading at USD1.0985 and brushed the USD1.10 mark earlier in the day.
In the FTSE 100, JD Sports Fashion was the best blue-chip performer, jumping 11% after it said it expects to generate GBP1 billion in cash every year over the next five year.
In addition, the sportswear retailer said it is aiming for double-digit revenue growth, double-digit market share in key regions, and double-digit operating margin.
Chief Executive Officer Regis Schultz said: "Today marks a new, distinct chapter in the growth story of JD as we set our plans to become the leading global sports-fashion powerhouse."
Shell fell 1.1% despite reporting soaring annual profit, amid surging commodity prices, as the skyrocketing profit could potentially intensify calls for a windfall tax to be imposed on oil majors.
The company also announced another buyback of USD4 billion, after recently completing a repurchase programme of the same size.
Shell made a yearly pretax profit of USD64.81 billion, more than doubling from USD29.83 billion. Revenue for 2022 soared 42% to USD386.20 billion from USD272.66 billion.
Brent oil was quoted at USD81.95 a barrel at the London equities close on Thursday, down from USD84.42 late Wednesday.
In the FTSE 250, Essentra climbed 8.0% as it said it will press on with plans to return GBP150 million to shareholders following the disposals of its Filters and Packaging divisions.
NCC slumped 13% as as the cybersecurity firm said trading is being hurt by a lengthening of sales cycles, and it warned of job cuts.
NCC explained that since the beginning of the second half of its financial year, it has experienced a lengthening of the sales cycle. This is leading to delays in buying decisions, work commencement and therefore revenue recognition. This has been a particular problem in North America and the UK.
Based on this, the company now expects only a single-digit revenue increase on a constant currency basis for all of financial 2023. In financial 2022, NCC reported GBP314.8 million of revenue.
It also said it plans to cut around 7% of its global workforce, mostly in the UK and North America, at a one-off cost of GBP4 million.
Stocks in New York were mixed at the London equities close, with the Dow Jones Industrial Average down 0.4%, the S&P 500 index up 1.4%, and the Nasdaq Composite up 3.0%.
The US Federal Reserve lifted interest rates by 25 basis points on Wednesday, as widely expected, and signalled that it was not finished raising rates.
The Federal Open Market Committee lifted the target range for the federal funds rate to 4.50% to 4.75% from a previous range of 4.25% to 4.50%. All twelve members of the committee voted for the rise.
In a press conference following the decision, Fed Chair Jerome Powell said the central bank will need "substantially more evidence" to be confident that inflation is on a sustained downward path in the US, despite "encouraging" recent developments.
Looking ahead, the Fed said it anticipates that ongoing increases in the target range "will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time."
"Historical record cautions strongly against prematurely loosening policy," Powell warned, adding that the US central bank would "stay the course until the job is done".
Against the yen, the dollar was trading at USD128.40 late Thursday, lower compared to JPY129.28 late Wednesday.
Gold was quoted at USD1,920.03 an ounce at the London equities close on Thursday, lower against USD1,928.82 at the close on Wednesday.
In the economic calendar on Friday, there are a slew of services PMI readings from the UK, US, EU, and Germany as well as Australia and China overnight.
By Heather Rydings, Alliance News senior economics reporter
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