FTSE 100 Live: 'Rates will need to stay high for some time', Andrew Bailey warns

The FTSE 100 edged up 1.4% at the end of the day's trading session in London, after the Bank of England once again pushed pause on any changes to interest rates.

Laith Khalaf, head of investment analysis at AJ Bell,said: “No news from the Bank of England is good news for the UK’s mortgage holders. The Bank has now kept interest rates on hold for the second month in a row, and there is a growing body of evidence to suggest we have reached the peak of the interest rate cycle. Inflation is falling, the labour market is slackening, and the effects of previous rate rises are still working through the economy.

"It also appears the replacement of Jon Cunliffe with Sarah Breeden on the interest rate committee has shifted the balance in a dovish direction, with six members now voting to keep rates on hold, up from five in September.

“Rishi Sunak won’t be too happy with all the latest forecasts coming out of the Bank of England. While the Bank’s figures suggest he is on course to meet his pledge to halve inflation, the promise of a growing economy looks firmly wedged in the weeds. The central forecast is for the economy to flatline in the next twelve months, before eking out just 0.4% growth in the year after.

"That’s a bleak prediction for a government seeking to overturn a large gap in the polls, and both the PM and the Chancellor will be hoping the OBR has a rosier view of the future when it compiles its all-important forecasts for the forthcoming Autumn Statement.”

Philip Jansen gave his BT swan song today, the last results before he moves on to be replaced by Allison Kirkby.

If you look just at the share price – down 55% over his five-year tenure – it’s not obvious that he has been a success. Jansen acknowledges that and wishes the shares were at least flat.

Ignoring the share price, everything else is miles better. Half-year results today have revenues of £10.4 billion and profit topping £1 billion.

There’s a divi, despite the strain on the company finances from its CapEx – it has spent, is spending, a fortune on transforming the nation’s broadband, building ultra-fast wi-fi “like fury” as Jansen likes to say.

It is that which will be his legacy, a brilliant national infrastructure that Covid made even more crucial. read more here

In a video posted online, Bank of England Governor Andrew Bailey explains today's interest rate decision.

Stocks opened higher in the opening minutes of trade on Wall Street, with the S&P up 1% and the Nasdaq up 1.8%.

Doordash led the pack, with the food delivery chain up 14% after its third-quarter results beat expectations and investors were wooed by its bullish forecast.

Here's a look at your key market data:

Gurpreet Gill, Macro Strategist, Global Fixed Income, Goldman Sachs Asset Management said: “The decision to keep the Bank Rate unchanged was widely anticipated and, in our view, reflects emergent progress on disinflation and a slowing economy.

“Bank of England officials have started to acknowledge that tight policy is impacting the economy, which we believe implies limited desire to move further into restrictive policy territory.

“We continue to think rates will stay at the current cycle high into 2024, a trajectory that the Bank’s Chief Economist, Huw Pill, has likened to Table Mountain.”

"The increase in inflation we have seen over the past two years has been a huge shock to families and businesses across the country. The rises in food and energy prices in particular, have hit the least well off the hardest. But everyone has been affected. It’s our job at the Bank of England to get inflation back to the 2% target.

"On that front, there's some good news. Inflation has fallen significantly and we expect it to fall significantly further, probably to below 5%, when the data for October are published in a couple of weeks. Our previous increases in interest rates are working to bring inflation down."

read more here

Financial markets and City experts were united in expecting the BoE to leave rates alone this month, so reaction was muted. Sterling held levels seen in the run up to the midday announcement, which left it established above $1.22. It was up 0.5% for the session at $1.2214.

The returns demanded by investors to lend to the UK government, or the yield on Gilts, were also steady. Ten-year Gilts yields eased further under 4.5% – to 4.379% after the vote – having started the day at 4.499%.

The MPC voted 6-3 to hold interest rates. Here's how members voted:

The Bank of England has left interest rates on hold for the second month in a row.

Its Monetary Policy Committee voted 6 to 3 to keep the base cost of borrowing at 5.25%.

Investors toasted a super Thursday of corporate updates today as the London market finally rediscovered its appetite for risk.

Alongside stronger-than-expected performances by the likes of BT Group and Sainsbury's, the mood benefited from a revival in fortunes for interest rate-sensitive stocks.

The wave of buying helped the FTSE 100 index put on 1.2% or 91.47 points to 7433.90, while the heavily sold FTSE 250 index rebounded 2.6% or 455.31 points to 17,641.20.

The turnaround in sentiment was aided by the handover from Wall Street after comments from the Federal Reserve boosted hopes that US interest rates are at their peak.

AJ Bell investment director Russ Mould said the performance of Ocado as the FTSE 100’s “biggest blue-sky company” was a good indicator of the wider stock market mood.

He said: “If it is falling then investors are feeling cautious. Today we’ve got an 8% share price hike.”

Ocado’s rise of 43.1p to 519p at the top of the FTSE 100 index was accompanied by a surge for property stocks after long-term bond yields fell in the UK and US.

Retail warehouse business Segro rallied 5% or 35.2p to 744.6p, just ahead of 4% gains for student accommodation firm Unite and the offices landlord Land Securities.

Smith & Nephew joined them, lifting 34.4p to 957.8p after third quarter revenues growth of 7.7% prompted the medical devices firm to forecast a 2023 performance towards the top end of previous guidance.

More than 50 stocks in the top flight rose by 2% or more, but exceptions included the consumer healthcare business Haleon after its shares eased 6.35p to 324.75p. The weakness came as quarterly sales growth of 5% marginally missed City hopes.

The FTSE 250 risers board included gains of above 10% for three stocks, led by Helios Towers after the telecoms infrastructure firm increased its full-year guidance.

Helios shares rebounded 7.65p to 69.1p, just ahead of 31.6p to 320p for OneSavings Bank after the buy-to-let specialist forecast stronger-than-expected loan book growth of 9% for the year.

The third double-digit stock was offices firm Derwent London, up 193p to 2038p after reporting continued strong letting activity since the summer and an improved vacancy rate of 3.7% at the end of September.