The Bank of England faces a “difficult balancing act” as it makes its next decision on interest rates at lunchtime, according to analysts.
Its Monetary Policy Committee is likely to continue the quickest series of interest-rate increases in three decades to quell a inflation that accelerated in February.
However, Sonja Laud, chief investment officer at Legal & General, warned that the efforts to slow down the economy will likely lead to more banks failing as “the weakest links are flushed to the surface first”..
5 things to start your day
1) Federal Reserve raises rates despite banking crisis | The central bank pressed ahead with a 0.25 percentage point rise in a bid to quash stubbornly-high inflation, despite ongoing problems for regional banks.
2) Andrew Bailey warns of ‘moral hazard’ after US bailout of SVB customers | Bank of England governor criticises US officials for protecting all depositors
3) What caused the shock inflation rise – and what it means for interest rates | Surprise jump in prices piles pressure on Bank of England on eve of rates decision
4) London stock market £200bn smaller than Paris | Fears grow that the City is losing its allure amid an exodus of companies
5) Google’s Bard chatbot repeats mistake that wiped $120bn off share price | Tech giant launches chatbot for public trial but admits it will make errors
What happened overnight
Asian markets mostly rose and the dollar retreated, brushing off a Wall Street retreat on hopes the Federal Reserve’s latest interest rate rise would be one of its last.
Hong Kong led gains, adding more than 1pc thanks to a rally in tech firms, while Shanghai, Seoul, Taipei, Mumbai, Bangkok and Wellington were also up.
The gains came even as bank chief Jerome Powell dealt a blow to hopes it could cut borrowing costs later in the year to soothe banking sector fears.
In a widely expected move, the Fed raised interest rates by 25 basis points but recast its outlook to a more cautious stance as a result of the banking stress.
Sydney, Singapore and Manila slipped. In Japan, stocks ended lower Thursday, tracking losses on Wall Street.
The benchmark Nikkei 225 index fell 0.2pc to 27,419.61, while the broader Topix index fell 0.3pc to 1,957.32.
Wall Street stocks sank after the Federal Reserve increased interest rates 0.25 percentage points in line with market expectations.
The Dow Jones Industrial Average shed 530.49 points, closing down at 1.6pc at 32,030.11.
The broad-based S&P 500 declined 1.7pc to 3,936.97, while the Nasdaq Composite tumbled 1.6pc to 11,669.96.
In particular, shares in US lenders plummeted after the Federal Reserved warned of tighter lending conditions following recent bank failures and the Treasury Secretary ruled out blanket deposit insurance.
The S&P 500 Banks Industry Group Index dropped 3.7pc to 277.44.
Meanwhile, US Treasury yields slightly retreated as interest rates rose. The two-year yield dropped to 3.96pc, while the benchmark 10-year yield dipped to 3.46pc.
Across the Atlantic, the pound surged against the weak dollar, climbing to a seven week high of $1.23.
