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FTSE slips into red and European stocks rise after BoE and Fed’s rate plans diverge

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FTSE FILE PHOTO: Governor of the Bank of England Andrew Bailey addresses the media during a press conference concerning interest rates, at the Bank of England, in London, Britain, November 2, 2023. HENRY NICHOLLS/Pool via REUTERS/File Photo

The FTSE 100 rose even after the Bank of England held firm on rates on Thursday. Photo: HENRY NICHOLLS/Pool via REUTERS/File (Reuters / Reuters)

The FTSE 100 and European markets were in a mixed mood on Friday as the day opened, following a week of key data and central bank action.

On Thursday, the Bank of England (BoE) had moved to hold interest rates steady at 5.25%, sending the pound higher against the dollar. This is the third time in a row the bank has held firm on rates.

Bank chief Andrew Bailey hinted that interest rates would remain elevated while borrowing is set to be “restrictive for an extended period of time”.

“My view at the moment is, it’s really to early to start speculating about cutting interest rates, we have got to see more progress,” he said.

On Friday morning, the pound (GBPUSD=X) was still trading at around $1.27.

The FTSE (^FTSE) was hovering on a flat line, the DAX in Frankfurt (^GDAXI) rose 0.5% and the CAC (^FCHI) in Paris was up 0.3%.

Read more: Mortgage rates fall for 20th week in row as Bank of England holds rates

The BoE’s stance is different than that of the US Federal Reserve, which had dropped hints that it would take a hawkish stance going into the new year.

Despite the prospect of higher borrowing costs, UK consumer confidence is on the up. GfK’s latest consumer confidence index rose two points to -22.

All five sub-measures showed modest improvement with personal finance situation for the coming year ticked up 1 point to -2, while the outlook for the general economic situation also improved by one point, to -25. The major purchase index rose one point to -23.

Follow along with us live today:

Live4 updates

  • UK private sector output ticks up to six-month high

    UK PMIs are out and it’s looking kind of positive. Here are the top lines:

    A reading of 50 or more indicates growth, anything below means contraction.

    • Flash UK PMI Composite Output Index at 51.7 (Nov: 50.7). 6-month high.

    • Flash UK Services PMI Business Activity Index at 52.7 (Nov: 50.9). 6-month high.

    • Flash UK Manufacturing Output Index at 45.9 (Nov: 49.2). 2-month low.

    • Flash UK Manufacturing PMI at 46.4 (Nov: 47.2). 2-month low.

  • Nationwide agrees on house prices

    Nationwide figures released this morning track with what Halifax has predicted, in that they say a rapid rebound in house prices is ‘unlikely’.

    They say: While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries. Moreover, while markets are projecting that the next Bank Rate move will be down, there are still upward risks to interest rates. Inflation is declining, but measures of domestic price pressures remain far too high.

  • House price falls on the horizon, says Halifax

    House prices are set to fall by up to 4% next year, according to Halifax, as pressure on household finances and consistently elevated interest rates take their toll.

    On Tuesday, it was revealed new mortgage commitments — lending agreed by banks to be advanced in the coming months — shrank by 41.4% year-on-year in the third quarter of 2023, as high interest rates continue to take their toll on the UK housing market.

    Data released by the Bank of England showed that there was a 16.5% decrease in new lending quarter-on-quarter, dropping to £51.5bn in Q3.

    Meanwhile, the outstanding value of all residential mortgage loans decreased by 0.1% from the previous quarter, data showed, and was 0.8% lower than a year earlier.

  • Overnight in the US and Asia

    Markets pained a mixed picture across Asia on Friday, with gains across Japan’s main index and a rally in Hong Kong.

    The Hang Seng (^HSI) rose 2.5%, closing out its best week since July, after news from Beijing and Shanghai that the government would ease downpayment ratios and repayment rules in the Chinese housing sector. Stocks were also spurred on by optimism about an end to the global central bank rate hiking cycle.

    Meanwhile the SSE Composite (000001.SS) fell 0.6% and the Nikkei in Japan (^N225) rose 0.9%.

    Equities closed Thursday out in the US higher, too, with the S&P 500 (^GSPC) up 0.3%, the Dow (^DJI) rising 0.4% and the Nasdaq (^IXIC) up 0.2%.

    The good mood came after the 10-year Treasury sank below 4% and retail sales clocked surprising gains, giving investors further confidence headed into 2024.

Watch: Bank of England keeps interest rates at 15-year high



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