UK Stocks Climb as Bank of England Holds Rates, Halts Long-Dated Gilt Sales
UK equities rose to their highest in over a week after the Bank of England held rates at 3.75% and paused long-dated gilt sales, sending 30-year yields lower.
UK equity indexes climbed to their highest level in more than a week on Thursday after the Bank of England left interest rates unchanged and announced a pause in government bond sales.
The blue-chip FTSE 100 closed 1.2% higher at 10,816.14 points, while the midcap FTSE 250 also rose 1.2% to 24,352.14 points.
Policymakers voted 6-3 to keep the benchmark rate at 3.75%. Governor Andrew Bailey cautioned that a prolonged conflict in the Middle East could require tighter policy ahead.
"Going forward, with inflationary concerns intensifying, the MPC will be getting increasingly uncomfortable, and no doubt hikes will be coming, most likely as soon as November," said Ed Hutchings, head of rates at Aviva Investors.
Market pricing compiled by LSEG shows traders have fully factored in at least one quarter-point increase this year, with the probability of a second hike rising.
Rate-sensitive banks advanced 1.6%, led by HSBC and Standard Chartered, which gained 2% and 2.2% respectively.
The central bank also paused UK government bond sales for six months and halted long-dated gilt sales entirely. The move came days after a global bond selloff pushed 30-year borrowing costs to 5.96%, their highest since 1998.
Gilts rallied sharply as yields declined, with the 30-year gilt yield dropping 11.8 basis points to 5.7414%, its lowest in over two weeks.
The decision followed the US Federal Reserve's quarter-point rate increase on Wednesday, which indicated one more hike in the coming months. Chair Kevin Warsh joined a unanimous vote in favour of the move.
Both central bank actions come amid a surge in oil prices driven by the Middle East war, which has stoked inflation and prompted policymakers worldwide to reassess monetary policy.
Among individual stocks, AstraZeneca rose about 2.4% after its Chinese unit said it would invest nearly 200 million yuan ($29.81 million) to upgrade production and supply operations in Wuxi, China.
Midcap IT services provider Bytes Technology jumped 12% after reporting a stronger-than-expected first-half performance and raising its full-year gross profit growth forecast.