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MARKET WRAP: BoE hike bets lifts yields, FTSE ends lower, Bitcoin nears record

EconomyOct 18, 2021 16:35
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Key Points

  • FTSE 100 closing price of 7,204.7, -0.4%
  • Bailey comments prompt BoE hike bets to increase
  • UK yields spike higher
  • GBP softens after touching 20-month high vs EUR
  • Oil prices higher amid tight supply
  • Bitcoin nears record high with ETF on the horizon

By Samuel Indyk – The FTSE 100 finished lower and UK yields were higher across the curve on Monday after comments from the Bank of England Governor Andrew Bailey prompted traders to bring forward their expectations for a rate hike.

Speaking to a group of central bankers on Sunday, Bailey said the BoE would “have to act” if they see a risk to medium-term inflation and to medium-term inflation expectations. Bailey didn’t make it clear that the BoE’s Monetary Policy Committee (MPC) thinks those risks warrant hiking, according to Pantheon Macroeconomics Chief UK Economist Samuel Tombs.

Nevertheless, markets took the comments as a signal that interest rates could go up sooner rather than later and begun aggressively pricing in rate hikes from as soon as next month.

The UK 10-Year yield jumped back above 1.17% before retracing some of the move. The yield on the benchmark 2-Year note, which is more sensitive to interest rate hikes, jumped over 12 basis points to its highest level since May 2019.

Despite the hawkish rhetoric from the BoE Governor, GBP was lower against the EUR and USD, although not before EUR/GBP touched a 20-month low below 0.8420. Year-to-date, GBP has gained around 5.5% against the EUR and is flat against the USD.

The FTSE 100 declined but managed to close above 7,200. In the mid-cap FTSE 250 index, Playtech (LON:PTEC) was the best performing stock with shares trading higher by almost 60% after agreeing to a takeover by Aristocrat Leisure. The Australian gaming company offered 680 pence per share, valuing Playtech at around £2.7 billion.

WTI and Brent crude futures were higher for much of the day, despite signs of an economic slowdown in China as GDP missed expectations. The largest oil importer in the world said GDP grew just 4.9% in Q3, below expectations of 5.2%. However, supporting prices were signs that OPEC is struggling to increase supply to meet the expected pick up in demand. Bloomberg reported that OPEC was producing 750,000 barrels per day below their production ceiling in September.

Bitcoin was in focus after the New York Times reported that the ProShares Bitcoin Strategy ETF (NYSE:BITO) would begin trading on Tuesday morning on the New York Stock Exchange. The ETF will be based on CME-traded Bitcoin Futures, rather than Bitcoin itself but some analysts are still expecting the authorisation to propel Bitcoin above its all-time high.


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MARKET WRAP: BoE hike bets lifts yields, FTSE ends lower, Bitcoin nears record

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