Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Sliding pound supports FTSE 100 after BoE flags recession risk

Economy May 05, 2022 17:35
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A man walks past the Bank of England (BoE) in London, Britain, December 16, 2021. REUTERS/Toby Melville

By Bansari Mayur Kamdar and Sruthi Shankar

(Reuters) -Britain's blue-chip index closed slightly higher on Thursday, supported by strong earnings from energy major Shell (LON:RDSa) and a slump in sterling after the Bank of England (BoE) warned the UK economy was at risk of a recession.

The FTSE 100 index rose 0.1%, while the domestically focussed mid-cap index slipped 0.6%.

Meanwhile, U.S. stocks tumbled as Federal Reserve Chair Jerome Powell's less hawkish tone failed to ease investor expectations of bigger interest rate hikes this year. [.N]

The BoE sent a stark warning that Britain risked the double-whammy of a recession and inflation above 10% as it raised interest rates to their highest since 2009, hiking by quarter of a percentage point to 1%.

The central bank also slashed its GDP forecast for 2023 to show a contraction of 0.25% from a previous estimate of 1.25% growth.

"The market reaction clearly is not looking at the slightly less dovish split vote, while clearly putting more focus on those much higher inflation forecasts and also the somewhat surprising forecast of the UK economy contracting in 2023," said Max Kettner, chief multi-asset strategist at HSBC, referring to a minority of BoE rate-setters calling for a larger rate rise.

"If we get closer to the point, with the Bank of England really over tightening to the degree that the UK economy is actually starting to look recessionary, the cyclical sectors in the FTSE 100 will be increasingly at risk."

Rate-sensitive bank and insurance stocks dropped about 0.6% each as government bond yields fell.

On the other hand, shares of dollar earners such as Diageo (LON:DGE) and British American Tobacco (LON:BATS) were supported as sterling tumbled more than 2% against the dollar to its lowest since July 2020. [GBP/]

Shell jumped 3.1% after the oil major posted a record quarterly profit, underpinned by higher oil and gas prices and a strong performance of its trading division.

Reach slumped 20.9% after the news publisher flagged tepid advertiser demand, with the Ukraine conflict reducing the amount of content that brands want to be linked with.

Sliding pound supports FTSE 100 after BoE flags recession risk
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email