FTSE 100 inches higher as Fed fuels rally in mining stocks
U.K. stocks staged a broad-based rally Thursday after the U.S. Federal Reserve had decided to slow the pace of planned interest rate hikes.
Later in the day, investors will get more central bank news when the Bank of England releases its policy decision.
The U.K’s FTSE 100 UKX, +0.18% gained 0.6% to 6,211.01, led by a surge in mining shares. Miner Anglo American PLC AAL, +9.99% leapt 10%, Glencore PLC GLEN, +7.97% jumped 8.9%, and copper miner Antofagasta PLC ANTO, +6.67% pushed up 7.8%
Alongside this, oil majors BP PLC BP., +2.54% BP, +2.94% and Royal Dutch Shell PLC RDSB, +1.78% RDS.B, +2.58% pushed up 2.6% and 2.4%, respectively, as oil prices CLJ6, +2.55% LCOK6, +2.38% traded roughly 3% higher.
Post Fed: The Fed late Wednesday penciled in just two quarter-point rate hikes this year, down from four in December. Rates were left unchanged Wednesday.
The U.S. central bank’s statement “struck that fine balance between confidence in U.S. economic recovery that warrants rate hikes, whilst also highlighting global downside risks that allow it to [rein] in projections for future U.S. interest rate hikes,” said Accendo Markets analyst Mike van Dulken in a note.
“The resulting weaker [dollar] has helped sentiment, notably the commodity space, with oil extending its gains,” he added. A key U.S. dollar index DXY, -0.69% slid 0.9% early Thursday.
BOE: The Bank of England is scheduled to make its announcement at 12 p.m. London time, or 8 a.m. Eastern Time. Policy makers led by Governor Mark Carney, are expected leave the benchmark interest rate unchanged at a record low 0.5%, where it’s been since March 2009.
Ian McCafferty, the “ever-hopeful hawk” on the central bank’s rate-setting board is “expected to remain on the dovish side of things this month,” said Connor Campbell, financial analyst at Spreadex, in a note.
“If Carney and co. do follow the lead of the inaction-favoring Bank of Japan and Federal Reserve, something that is effectively guaranteed, [the pound]…may see its minor rebound disappear,” he added.
The pound GBPUSD, +0.3086% was buying $1.4300, compared with $1.4225 late Wednesday in New York.
The FTSE 100 on Wednesday advanced by 0.6% as oil and property stocks gained following the British government’s annual budget plans.
Movers: Rio Tinto PLC RIO, +5.80% shares gained 5.2%. The iron ore heavyweight said Jean-Sebastien Jacques, the head of the Anglo-Australia miner’s copper and coal division, will succeed Sam Walsh as chief executive. Walsh will retire July 1.
“It is our belief that this signals a change of direction for Rio Tinto. We see this as speaking to a de-prioritisation of the iron ore business and operational management per se, and a re-prioritisation of strategic vision and an M&A agenda,” said Bernstein senior analyst Paul Gait in a note.
GlaxoSmithKline PLC GSK, -0.53% said Andrew Witty plans to retire as chief executive in March 2017 after roughly 10 years in the top position. Shares slipped 0.1%.
Source: MarketWatch
