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Banks And Insurers On The Rise. BOE Decision Next

Published 04/08/2016, 11:09
Updated 03/08/2021, 16:15

European markets are broadly stronger on Thursday amid generally positive corporate results, a higher oil price and banks extending a recovery from the sharp sell-off this week.

Markets have been in limbo, awaiting the policy decision from the Bank of England, which is widely expected to slash rates to a new record low of 0.25%. It would be the first move in rates in over seven years.

The FTSE 100 was edging into positive territory by mid-morning with Aviva (LON:AV) leading a charge of insurers including RSA and Legal & General, after it increased its dividend. Banks HSBC (LON:HSBA), Barclays (LON:BARC) and Lloyds (LON:LLOY) were amongst the top risers on the UK benchmark after a hefty sell-off at the start of the week.

Low interest rates for over seven years have had unwanted consequences for insurers as well as banks. Low interest rates are threatening insurance companies’ ability to earn the returns needed to payout on some insurance products. Aviva’s results will be well-received by shareholders of Prudential (LON:PRU), Standard Life (LON:SL) and Legal & General (LON:LGEN), all of whom report earnings next week

The British pound was lower against most major currency pairs on the Bank of England’s “Super Thursday”. The BOE will announce policy, release minutes and its latest forecasts at 12pm BST, followed by Mark Carney’s press conference at 12.30pm.

There will be multiple elements to determine the market reaction to the BOE; namely the level of stimulus (rate cut, QE, funding for lending), growth / inflation forecasts, the voting (unanimous or not) and Governor Mark Carney's tone in the press conference

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Market moves in the immediate lead-up to the BOE decision have been somewhat counter-intuitive, suggesting extreme positioning and some scope for disappointment. With an easing of monetary expected, GBP/USD had its highest close in a month on Tuesday and UK stock markets have been falling.

US stocks look set for a lower open ahead of another day packed full of earnings with over 30 S&P 500 companies reporting. Yesterday the Dow snapped a seven-day losing streak to close higher. Shares of electric car-maker Tesla will be in focus after missing earnings estimates but building more vehicles than expected.

USA pre-opening levels

S&P 500: 2 points lower at 2,161

Dow Jones: 12 points lower at 18,343

Nasdaq 100: 11 points lower at 4,723

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No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "

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