FTSE 100 reclaims 7,100 as investors eye BoE interest rate decision

Written by Kunal Sawhney, Kalkine Media

UK shares continued the surge with the FTSE 100 rising a little more than 3% in the last three sessions, comfortably reclaiming the psychological level of 7,100 ahead of the Bank of England’s interest rate decision. The nine-member Monetary Policy Committee (MPC) is set to unveil the latest stance of the central bank, alongside the conclusive decision on interest rates, as well as quantitative easing.

In the last few MPC meetings, all the nine members have unanimously voted to keep interest rates unchanged at record low levels and maintain the quantum of bond purchases, effectively extending the stimulus needed to sail through the tightened business environment.

As the Federal Open Market Committee of the US Federal Reserve kept the key lending rates at record lows, a similar outcome is expected from the BoE’s MPC. Investors and businesses are already struggling with the ever-expanding hardships of pandemic, mutated strains of virus, persistently high rate of hospitalisation, and the unemployment levels remaining higher as compared to the pre-Covid era.

Following Monday’s market mayhem, the benchmark FTSE 100 has already added over 3%, largely paring all the losses of September.

A market-wide buying was seen on the counters today with the heavyweight components from pharmaceutical, bank, mining and oil & gas industries supporting the index. Shares of AstraZeneca emerged as the biggest positive-point contributors to the index, followed by the blue-chip stocks of HSBC Holdings, Diageo and Glencore.

The outcome of the meeting will certainly help the investors to rejig their trade setups accordingly before the commencement of the third quarter earnings season. The soon-to-be-announced results during the October-December period will highlight and reflect the material benefits of easements and relaxed social distancing norms.

On the other hand, the results will also indicate the potential aftereffects of raw material shortages, inadequate supply of goods at retail stores, staff shortages, challenges due to supply chain crisis and prospective impact of higher hospitalisations.

Between the July-September stretch, the businesses have been able to resume their respective operations on the widest scale for the first time in the pandemic era. This has been the biggest development for domestic enterprises as most of them have been trying to realign their broken balance sheets, minimising the existing levels of debt, while some are extensively working towards corporate restructuring measures.

Of late, the macroeconomic indicators have indicated a subdued growth following the unending challenges in the operating environment due to the persistent problem of workforce crisis, delayed shipments, retailers operating with partly-filled shelves, limitedness of raw materials, and higher factory-gate prices.

The IHS Markit/CIPS compiled PMIs for manufacturing and services have dropped in the month of September, according to the preliminary readings revealed by the survey manager. Of the two sectors, Manufacturing PMI has declined sharply in September, registering the slowest growth since February of 2021.

The slowdown in the manufacturing activity has been perpetrated by lower-than-expected demand, modest growth in the frequency of new orders, continuing scarcity of staff and the malfunctioned supply chain systems. The full-month readings are likely to remain predominantly similar. However, the investors are unfazed by the slower expansion as a substantial growth is being anticipated in the final quarter on the back of higher consumer spending and considerable improvement in the business sentiments.

About Lisa Baker, Editor 2425 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.