Market Commentary | BoE leaves interest rates unchanged

Worldwide stocks proceeded with their rally on Thursday, after the Bank of England surprised the markets by holding its key interest rate unchanged at a record low of 0.5%, despite speculation that this rate will be lowered further. A week-long rally across Asian stocks hit the brakes on Thursday, although shares in Asia still ended the day trading higher.

On Wall Street, US stocks extended their run into the record books, as the S&P 500 and the Dow set all-time highs, aided by strong gains in oil prices, which boosted risk appetite.

In a widely unexpected move, the Bank of England decided to leave its key interest rates unchanged and also made no changes to its £375-billion asset-purchase programme. The sterling rose to a two-week high on the news, and the international benchmark, the FTSE 100, trimmed some of the gains it made earlier in the day. Nevertheless, the BoE left the door open to easing in the near future when the central bank holds its first monetary policy decision after the UK historic Brexit vote.

Bank shares held to higher ground following the interest rate decision. Italian banks were once again in focus for investors on Thursday. UniCredit shares soared 6.24% after the bank said it is considering a capital increase to meet European Central Bank requirements. Meanwhile, Barclays plc sprung higher by 2.2% and Royal Bank of Scotland climbed 2.76%. Lloyds was also up, adding 1.9%.

Companies that bring in a significant portion of their sales from outside the UK found their shares tumbling, as the pound rose in the BOE aftermath. Luxury goods maker, Burberry Group were on the declining side, as shares fell 2.27%. Shares in sportswear giant Adidas also lost 1%, and bottler Coca-Cola was down 0.84%.

Meanwhile, shares of videogame maker Nintendo continued to soar on Thursday and added a further 15.9% thanks to the craze around its ‘Pokémon Go’ app. This brings Nintendo’s total gain for this week alone to more than 50%! In the eight days since being released, the mobile game has swept millions of users, sending them on a real-life hunt for animated monsters. Nintendo shares closed Thursday’s session at ¥25,300.

US stocks continued their winning streak, finding support in stronger-than-expected results from large financial institutions as well as upbeat economic data. Oil prices rebounded from Wednesday’s hammering, boosting shares of energy companies. Crude oil was trading at $45.50 per barrel, after adding 1.70% during the session.

The earnings season continued at full speed on Thursday. Shares of J.P. Morgan Chase were up, as it kicked off earnings for the nation’s biggest banks with stronger-than-expected quarterly earnings. Shares of other large banks also rose. Bank of America, Goldman Sachs and Morgan Stanley all added over 2% each.

KFC, Pizza Hut and Taco Bell owner, Yum! Brands, traded higher after its key China business showed signs of strength. The company received a price target increase, and raised its forecast for core operating profit growth, sending shares soaring almost 4%.

Disclaimer:

This article was issued by Rebecca Naudi, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.