Key facts
- The FTSE 100 index closed 1.2% higher at 10,816.14 points on Thursday.
- The Bank of England voted 6-3 to keep interest rates at 3.75%.
- The BoE will pause gilt sales for six months and halt long-dated gilt sales entirely.
- Traders expect at least one more rate hike by year-end, most likely in November.
- The US Federal Reserve raised interest rates by 25 basis points on Wednesday.
London's FTSE 100 index closed 1.2% higher at 10,816.14 points on Thursday, reaching its highest level in over a week, as the Bank of England kept interest rates unchanged as expected and announced it would halt sales of long-dated gilts entirely. The mid-cap FTSE 250 index also climbed 1.2% to 24,352.14 points.
The BoE's Monetary Policy Committee voted 6-3 to maintain the base rate at 3.75%. Governor Andrew Bailey cautioned that prolonged conflict in the Middle East might necessitate tighter monetary policy. Traders have fully priced in at least one 25-basis-point rate hike by the end of the year, with a November hike being the most likely scenario.
Rate-sensitive banking stocks gained 1.6%, led by HSBC and Standard Chartered, which rose 2% and 2.2% respectively. The central bank's decision to pause UK government bond sales for six months and halt long-dated gilt sales entirely triggered a rally in gilts, with the 30-year gilt yield falling 11.8 basis points to 5.7414%.
In other market news, the US Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday and signaled one additional hike in the coming months. Among individual stocks, AstraZeneca rose approximately 2.4% following an announcement of a nearly 200 million yuan investment to upgrade its production and supply base in China. Mid-cap IT services provider Bytes Technology jumped 12% after reporting stronger-than-expected first-half results and increasing its full-year gross profit growth forecast.