UK’s FTSE 100 hits 12-week high, but trims gains after BoE rates pushback

By Shashwat Chauhan and Shubham Batra

(Reuters) -The UK’s FTSE 100 gave up some gains on Thursday after the Bank of England (BoE) indicated that interest rates would remain high for an extended period, a day after the U.S. Federal Reserve hinted that it could pivot to cutting rates next year.

The pound jumped 1.2% as the central bank stuck to its guns, largely shrugging off data showing a slowdown in wage growth and a 0.3% fall in gross domestic product in October.

The Monetary Policy Committee voted 6-3 to keep rates at a 15-year high of 5.25%, in line with economists’ expectations in a Reuters poll last week.

“It (BoE) faces a tougher trade-off between protecting growth and controlling inflation than other developed markets; compared to the U.S., growth has been weaker and the disinflation process bumpier,” said Vivek Paul, UK chief investment strategist at BlackRock Investment Institute.

The blue-chip FTSE 100 was up 1.3% after earlier touching its highest level since Sept. 22, while the more domestically focussed FTSE 250 mid-cap index soared 3.0%. It climbed to its highest level since July.

Sentiment remained upbeat after the Fed stuck to a widely expected dovish script and left interest rates unchanged on Wednesday. Chair Jerome Powell said that policy tightening is likely over as inflation falls faster than expected, with a discussion of cuts in borrowing costs coming “into view”.

Miners of precious and industrial metals rallied 5.9% and 4.3%, respectively, as most metal prices jumped. [MET/L] [GOL/]

Rate-sensitive real estate, real estate investment trusts, and homebuilders jumped between 4.1% and 5.6%.

The European Central Bank also held rates steady and pushed back against bets on imminent cuts to rates by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations.

Among individual stocks, Currys rose 10.4% after the electricals retailer stuck to its annual financial forecast and said its balance sheet and liquidity had strengthened.

Software and robotics platform Ocado was the top FTSE gainer, rising 11.6% and hitting a 12-week high.

(Reporting by Shashwat Chauhan, Siddarth S and Shubham Batra in Bengaluru; Editing by Mrigank Dhaniwala, Sonia Cheema and Jonathan Oatis)