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British banks lift FTSE 100 after BoE raises rate

Shares in British banks rallied, lifting the blue-chip FTSE 100. This is after the Bank of England stunned investors with an interest rate hike. This is the world’s first major central bank to do so since the pandemic hit the global economy last year. The FTSE 100 gained 1.3%, breaking a six-day slump, while the banks index jumped 3.7% after the BoE raised its main interest rate to 0.25% from 0.1%. The inflation was likely to hit 6% in April.

Shares in Lloyds Banking Group, Barclays, Standard Chartered and HSBC jumped between 3.8% and 4.6%, topping gains on the blue-chip index. Roland Kaloyan, head of European equity at Societe Generale said that the BoE raising rates just the day after the Fed opened the door to market rate hikes next year. This is showing that even if they have desynchronisation of monetary policy, they are all going in the same direction. The market doesn’t like uncertainty and the fact that it (BoE) is delivering now in line with expectations is quite reassuring.

Sterling jumped as much as 0.8% against the U.S. dollar. Interest-rate sensitive two-year gilt yields rose by more than 7 basis points on the day to 0.56%. The European Central Bank cut stimulus further, while the U.S. Federal Reserve accelerated the tapering of its bond purchases programme all pointing to a gradual withdrawal of the copious stimulus. This has supported the pandemic-hit global economy. Domino’s Pizza Group jumped to the top of the mid-cap FTSE 250 index. This is after raising its medium-term sales forecast. It had reached an agreement with its franchisees over commercial terms for profit-sharing.

Online fashion retailer Boohoo plunged 23.1%. This is after warning that expectations for its 2021-22 year will be lower than previously guided, blaming higher returns, delivery disruptions and pandemic-related cost inflation.

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