The UK blue-chip benchmark closed up around 44 points, or 0.62%, at 7,188 on the day the Bank of England followed in the footsteps of the US Fed by hiking interest rates 0.75 percentage points
FTSE 100 managed a positive finish on Thursday, having been lower earlier, as the weaker pound benefitted the big-cap index’s dollar-earning constituents.
The UK blue-chip benchmark closed up around 44 points, or 0.62%, at 7,188 on the day the Bank of England followed in the footsteps of the US Fed by hiking interest rates 0.75 percentage points.
It means that the UK base rate currently stands at 3% and the central bank also gave an alarming assessment of what may lie ahead, namely the longest recession since records began.
The Bank of England’s latest rhetoric is worrying. Inflation must be tamed, but interest rate hikes take time to feed through to the real economy, and there is a risk of making things worse than they need to be, noted Lee Wild, head of equity strategy at investment platform interactive investor.
Any business that relies on a strong consumer is at risk when household finances get squeezed. The retail industry is already competing with housebuilders for the title of worst performing sector in 2022, and a lot of bad news is already priced in, he added.
However, if conditions do deteriorate further, there could be more pain to come. We’ve already seen profit warnings from ASOS, Boohoo, and others, and investors would do well to monitor the health of these ‘at risk’ sectors as higher borrowing costs begin to bite, he said.
Despite the Bank of England’s rate hike to 3% and a warning of a prolonged recession, leading shares remain in positive territory heading into the close.
Michael Hewson, chief market analyst at CMC Markets UK, said: After yesterday’s sharp declines in the US, European markets have followed suit, falling back sharply across the board, although the FTSE 100 has outperformed with this afternoon’s sterling weakness appearing to offer a degree of support.
But the more domestically focused FTSE 250 has been spooked by the recession talk, and is down 0.76% at 18,078.93.