Europe midday: Shares churn out more gains as BoE raises rates again
By Frank Prenesti
Date: Thursday 05 May 2022
(Sharecast News) - European stocks extended gains at on Thursday after the Bank of England raised interest rates to their highest level since 2009 and the US Federal Reserve also imposed a hike, but ruled out more aggressive moves in the future.
The pan-European STOXX 600 index rose 1.27%, with investor sentiment also helped by another dump of corporate earnings and updates.
In London, the Bank of England lifted its key base rate by 0.25 percentage points increase to 1%, as it looked to stem soaring inflation. It was the fourth consecutive rate rise from the Bank's monetary policy committee (MPC), and takes borrowing costs to a level not seen since February 2009.
UK inflation hit 7% in March, the highest level since 1992 and more than triple the Bank's official 2% target, as Russia's war on Ukraine forced up oil and gas prices.
However, there were signs the MPC is becoming increasingly divided on future increases in rates. The nine-member committee was split 6-3 in favour of a rise this time.
"At the previous meeting in March, only deputy governor Jon Cunliffe voted to keep rates on hold, suggesting that the central bank is becoming increasingly concerned about tipping the UK economy into recession. The Governor Andrew Bailey himself said the bank is walking a 'narrow path' between growth and inflation as both macro indicators journey in the opposite and wrong directions," said Victoria Scholar, head of investment at interactive investor.
In the US, Wall Street closed higher after the Fed raised interest rates by 50 basis points, but the central bank's Chairman Jerome Powell scotched suggestions of a 75 basis point hike in a coming meeting.
In equity news, shares in digital advertising firm S4Capital rose 17% as the company said it would publish delayed results on Friday.
Airbus shares rose after the aircraft maker reported higher-than-expected first-quarter profit and firmed up record plans for a 50% hike in narrow-body jet output.
Oil giant Shell gained after reporting a record first-quarter profit of $9.13bn, boosted by higher oil and gas prices which have been inflated due to the Ukraine war. The company also pledged more returns to shareholders.
BMW was higher as it posted a rise in quarterly profit, lifted by a re-evaluation of its Chinese joint venture stake and strong pricing.
Shares in Hikma Pharmaceuticals fell as the company cut annual sales and margin forecasts for its second-biggest unit, due to possible delays in the launch of a generic version of a sleep disorder treatment.
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