The governor of the Bank of England Mark Carney confirmed at midday that UK interest rates will be kept at 0.25%, as expected. More significantly Carney has revised down the UK’s growth forecast, from 1.9% to 1.7%. Brexit uncertainty is at the heart of the Bank of England’s caution.
"It's evident in our discussions across the country with businesses," Carney said earlier, "that uncertainties about the eventual relationship are weighing on the decisions of some businesses."
The bank was pretty downbeat on wage prospects also. Wage growth will slow from 3.5% to 3% next year. Shop price pressures for many, thanks to the sharp plunge in sterling following the Brexit vote, continues to make life difficult for many UK consumers.
The Bank of England-Brexit angst was enough to give the pound a -0.7% shove south against both the US dollar and the euro. The pound is still above $1.31 ($1.3125, 3.40pm) but the recent gains are starting to look highly fragile.
- UK FTSE 100 7,477.46 +0.89%
- Dow 22,027.88 +0.05%
- S&P 500 2,474.40 -0.13%
- Nasdaq 6,350.43 -0.19%
- Nikkei 225 20,029.26 -0.25%
- DAX 12,158.04 -0.18%
- CAC 40 5,136.45 +0.57%
- Gold 1,274.00 -0.34%
- Oil WTI 49.69 +0.20%
FTSE 100 surges on rate hold
However much of the UK stock market was delighted by the Bank of England’s hand-wringing with the FTSE 100 climbing close to 1% mid-afternoon. By close of day the Big Board was up 0.89% with Next (more shortly) and Randgold Resources up solidly. Both Imperial Brands and BAT saw 3% share price rises to 3.14% and 3.10%.
The Bank of England’s (BoE) continued worry about the economy and its reluctance to hike rates was still accompanied by some tough talk, even if the action behind it was limp. Much of the BoE worry lies with wage inflation. UK Unemployment is at 4.5% yet wages continue to flatline. Much of the UK service economy – close to 80% – is reliant on part-time or low paid work with zero hours contracts common.
In other words, the UK jobs market remains precarious behind the bullish-sounding employment stats and government pronouncements.
Next shares climb; South African Airways may be broke
A big gainer today was Next. This morning it reported some concern about sales but robust trading from its Next Directory catalogue business plus generally warmer shopping weather saw Next shares surge almost 10% today to 4,389p.
Skeptics may say it was inevitable: though Green & Black’s built their business on their Fairtrade and organic ethos, the company is launching a range of new ‘Velvet Edition’ range – with no Fairtrade moniker attached.
Mondelez International, the sprawling US confectionery and beverage business and new owner of Green & Black’s, says the cocoa beans used to manufacturer the Velvet Edition bars will be sustainably sourced.
Breaking news: UK environment secretary Michael Gove says some foreign trawlers will still be able to fish in UK waters post-Brexit. South African Airways appears on the edge of bankruptcy as its debts continue to mount.