UK stocks rise as BoE keeps interest rates steady

By Siddarth S and Khushi Singh

(Reuters) -London stocks jumped on Thursday, driven by rate-sensitive homebuilders and real estate stocks as the Bank of England (BoE) kept interest rates unchanged though it also dismissed the prospect of rate cuts any time soon.

The exporter-focused FTSE 100 climbed 1.4%, while the mid-cap FTSE 250 leapt 3.4%.

The benchmark FTSE 100 logged its best day in over three weeks, while the mid-cap index marked its best session since July.

The BoE held interest rates at a 15-year peak of 5.25% and said it did not expect to cut them any time soon as it fights to “squeeze out of the system” the highest inflation among the world’s big rich economies.

“Today’s (BoE) communications are hardly indicative of policymakers looking to conduct further rate hikes, evidenced not only by the fact that the core of the (Monetary Policy)Committee voted for a hold but also by the minutes highlighting brewing concerns that the Bank has overtightened,” Nick Rees, FX market analyst at Monex Europe, said in a note.

By keeping rates on hold the BoE mirrored the policy decisions of the U.S. Federal Reserve on Wednesday and the European Central Bank last week.

Sterling firmed against a soft dollar, while prices of benchmark 10-year British bonds rose and were on track for their best day in more than a month following the BoE decision.

Homebuilder shares rose 2.9%, while real estate stocks soared 6.0%.

Most sectoral indexes ended higher with a series of upbeat corporate earnings also boosting the broader market.

Shares of Britain’s biggest broadband and mobile provider BT Group jumped 5.7% after the group’s second-quarter earnings came in slightly ahead of forecasts.

Sainsbury’s closed 3.8% higher after the supermarket group said full-year profit would come in at the upper half of its forecast.

Shell gained 4.2% after it posted in-line quarterly profit and announced a share buyback programme of $3.5 billion over the next three months.

(Reporting by Siddarth S and Khushi Singh in Bengaluru; Editing by Savio D’Souza, Saumyadeb Chakrabarty and Susan Fenton)