By Samuel Indyk
Investing.com – The FTSE 100 ended the day unchanged after the Bank of England interest rate decision where they kept their interest rate at record low of 0.1%, as expected. Focus was on the commentary around negative rates where the Bank said that banks should make sure they are prepared to implement a negative bank rate if the economy was to worsen. However, they were very keen to stress that these actions taken should not be interpreted as a signal that negative rates were imminent, effectively ruling it out in the near term.
Following the decision, the pound strengthened with GBP/USD jumping a point off its lowest level before paring some of the gains. EUR/GBP dropped below 0.88 to its lowest level since May last year.
The stronger pound weighed on the FTSE 100 with the blue chip index closing the day flat after initially rising in the morning. Unilever PLC (LON:ULVR) was the worst performing stock in the index after the company reported results in pre-market. Overall, pre-tax profits were down 3.5% although when moves in currency are stripped out profits were up just shy of 4%.
Oil major Royal Dutch Shell PLC Class A (LON:RDSa) also fell after earnings with the company reporting a net loss of $21.7bln last year as the pandemic sapped demand for oil.
Banks were the best performers after the Bank of England decision with Lloyds Banking Group PLC (LON:LLOY) and NatWest Group PLC (LON:NWG) the top of the FTSE. Negative interest rates would squeeze already tight margins at banks so the signal from the central bank that a rate cut is not imminent lifted share prices.
The FTSE 350 Travel & Leisure sector also performed well as the UK vaccine effort continues at pace. Vaccines Minister Nadhim Zahawi said the UK is on track to reach their target of offering jabs to everyone in the four most vulnerable groups by the middle of this month and confirmed that more than 10mln people have now received their first jab.
Gilts came under selling pressure following the Bank of England’s decision with UK 10 YR Gilt Futures down 75 ticks and the yield on the 10y rising 7 basis points to 0.44%.