FTSE 100 soars as investors eye possible BOE interest rate cut

U.K. stocks traded higher on Thursday, with broad-based gains arriving ahead of what could be the first interest-rate cut by the Bank of England in seven years.

The FTSE 100 jumped 1% to 6,733.28. All sectors traded higher, led by mining, oil and gas and financial shares.

Investors will cast an eye toward Bank of England policy makers, who will release their policy decision at 12 p.m. London time, or 7 a.m. Eastern Time. Markets have overwhelmingly priced in the likelihood that the bank, led by Gov. Mark Carney, will cut the benchmark rate to a record low 0.25% from 0.5%. The bank last cut its key rate in March 2009 and it’s been held at 0.5% since then.

Among banking shares, Lloyds Banking Group PLC Barclays PLC rose 1.2% and Royal Bank of Scotland PLC climbed 1.5%.

Meanwhile, the pound was buying $1.3222 compared with $1.3202 late Wednesday.

The midcap FTSE 250 gained 0.7% to 16,861.63.

Carney recently alluded to monetary easing this summer as policy makers see a “challenging” outlook for the British economy as it faces exiting the European Union.

On Wednesday, Britain’s new Prime Minister Theresa May appointed some new cabinet members, including naming Philip Hammond as the new Treasury chief and David Davis, who will be in charge of Brexit negotiations with Europe.

With some clarity on the new government lineup, “I would be keen to see that the Monetary Policy Committee takes no action … so that they and the government have time to more fully assess the situation in the coming months — this is what the investment community needs right now,” said Michelle McGrade, chief investment officer at TD Direct Investing, in a note late Wednesday.

Carney “has cautioned that zero and negative interest rates would not be good for banks, and with the Bank of England also being the regulator of the banking industry, it has a duty to ensure that banks remain in a healthy state,” McGrade said, adding that other stimulus measures the government could enact “may be more effective,” than a rate cut.

Source: MarketWatch