Rates decision softens the pound but the FTSE rallies

LONDON stocks turned a corner as news started to come out of the US on Thursday afternoon.

After trading down all day, the FTSE 100 index of the capital’s biggest companies flipped its fortunes at around 1.30pm, gaining 40 points in half an hour and turning what looked to be a loss into a win.

The index ended the day up 17 points, or 0.3 per cent, at 6,779.68.

It was amid the first signs of early trading in New York that the index turned around.

Traders there and elsewhere have been focused on comments from Federal Reserve chairman Jay Powell, who spoke on Wednesday evening US time.

Markets had been lower on Wednesday as traders worried the Fed could hike interest rates sooner than expected. However, Mr Powell signalled it could be years until rates begin to rise.

On Thursday, it was the Bank of England’s turn to reveal that its decision makers had unanimously backed keeping its base rate at a record-low 0.1 per cent.

The decision softened the pound, which was down 0,3 per cent by the end of the day to 1.3931 dollars, a move which likely also helped the FTSE 100. Against the euro sterling rose 0.3 per cent to 1.1689.

But though the FTSE might have gained ground, it fell behind its German cousin the Dax, which soared by 1.3 per cent, hitting a new all-time high during the day while riding on the Fed’s statement.

“The Bank of England was unable to do the same for the FTSE... despite striking a similar tone to its US counterpart. Andrew Bailey and co also suggested they are willing to let inflation increase (or even overshoot the 2 per cent target), and the economy rebound, before hiking rates and tapering stimulus,’’ said Spreadex analyst Connor Campbell.

The S&P 500 fell 0.5 per cent while the Dow Jones dropped 0.4 per cent.

Oil prices fell heavily, with Brent crude shedding 5 per cent to 64.48 dollars per barrel. Energy giant Shell faced a drop of 0.9 per cent, likely influenced by the Brent price, while BP fared a little better, down 0.6 per cent.

Miners, whose fortunes have often defined the FTSE over recent weeks, were less in play on Thursday, though were generally in the green.

For the second day in a row,

Ocado, which has benefited from the pandemic so far, was bottom of the FTSE 100.

The online supermarket said Thursday morning that it expects sales and earnings growth to ease soon, because it will be comparing itself to the post-lockdown surge from a year ago. Shares dropped almost 5 per cent.

Fever-Tree was even further in the red, down more than 12 per cent after it revealed the extent of the Covid-19 devastation on its business in the UK, where sales dropped 22 per cent last year.

BT said it would spend £12 billion bringing full fibre broadband to 20 million new homes by 2030. Its shares fell by around 0.8 per cent.

The news that BA owner IAG plans to sell bonds for around one billion euros left its shares rather unaffected - down 0.2 per cent.

National Grid dropped 0.3 per cent as it announced a series of multibillion-pound deals which will see it pivot further towards electricity.

The Gym Group closed up more than 2 per cent as the company revealed that 97% of members say they will be back to the gym as soon as possible after the pandemic.

The company sunk to an unsurprising loss last year, reaching £47 million, as its sites were forced to close.

The biggest risers on the FTSE 100 were Informa, up 23.6p to 598.6p, DCC, up 200p to 6152p, Antofagasta, up 56.5p to 1765p, Evraz, up 16.6p to 566.8p, and Schroders, up 88p to 3534p.

The biggest fallers on the FTSE 100 were Ocado, down 103p to 1980p, M&G, down 9p to 205.1p, SpiraxSarco, down 275p to 11245p, Compass Group, down 33.5p to 1506.5p, and Rolls-Royce, down 2.65p to 124.55p.