Thursday, 14th September: As expected the BoE kept interest rates in the UK on hold at the record low level of 0.25%. Although voting 7-2, policymakers warned a rate hike was likely to be needed in coming months if the UK economy continued to grow and inflationary pressures persist. In a statement following the decision, the Monetary Policy Committee (MPC) said the majority of officials in the nine-member panel believe borrowing costs will need to rise to bring annual inflation back to its 2% goal (latest inflation was reported at 2.9% on Tuesday). Some are speculating a rate rise could come as soon as the BoE’s next meeting in November, when they release their Inflation Report also. Rhetoric over a nearing rate rise pushed the pound higher, higher by more than 1% in afternoon trading. At the time of writing GBP/USD is $1.3389, +1.38%, while GBP/EUR is €1.1270%, +1.44%. The swing higher in currency markets pushed the FTSE 100 lower, where it continued to the close.
Next surged to the top of the London index this morning, who released their more recent half year report, raising its profit and revenue guidance for the full year. Although first half profits fell due to lower performance from high street shops, reporting an upturn in the online side of the business meant the outlook for the year has improved. Shares finally closed higher by 13.06%, their highest level since the end of 2016. At the foot of the index was supermarket chain Morrisons who reported fading sales momentum, as comparable sales increased more in Q1 than Q2, although they continue with their 7th consecutive quarter of like-for-like sales. However, with cost inflation and rising wages facing the sector, alongside cutting prices to keep up with discounting competition, the shares fell 5.14% at the close.
Inflation in the US has risen the most since January with CRP rising 0.4% in August from July. Much of the rise came from an increase in “gasoline” prices as the US like to call it after Hurricane Harvey. Excluding food and energy costs, core prices grew 0.2%, the most since February. CPI had been expected to rise 0.3%. It leads the way to the Federal Reserve who once again meet next week for their latest rate decision; they have been waiting for signs of rising inflation to couple up with the low unemployment and steady job growth, before raising rates again. The annual rise in prices is 1.9% in the 12 months to August, keeping it at a subdued level and a touch below the 2% target rate.
European indices were slightly higher at the close with the CAC in France closing +0.15%, while in Germany, the DAX was +0.08%. The FTSE 100 in London closed lower by 1.14% while the 250 closed -0.34%. Indices in the US don’t seem to be showing much reaction to risk from investors after North Korea has threatened to “sink” Japan and reduce the US to “ashes and darkness”… Trump has been showing his support to victims of Hurricane Irma in Florida today and hasn’t responded to any North Korean threat on twitter (yet).