The FTSE closed 1.59% ahead at 6740.16 – marking at 105.8-point gain – as investor optimism was buoyed by the fact that the Bank is taking action to avoid a post-Brexit recession. Korea’s Kospi SEU, +0.68% was up 0.5%.
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In what one bank dubbed a “sledgehammer stimulus”, the Bank of England cut interest rates 25 basis points to 0.25 percent and said it would buy $79 billion of government bonds with newly created money over the next six months. Hong Kong’s Hang Seng HSI, +1.29% rose 1.1%.
But three policy makers – Kristin Forbes, Ian McCafferty and Martin Weale – opposed raising the target for quantitative easing government bond purchases to 435 billion pounds from the 375 billion total reached in late 2012. Despite the overnight rally in the ICE U.S. dollar index, Asian currencies were largely stable.
The move pushed yields on 10-year United Kingdom government bonds, or Gilts, to a record low of 0.639%.
Sterling fell 1 percent against the U.S. dollar following the bank’s announcement, while British government bond yields hit record lows and the main share index rose by 1 percent.
AUD/USD outperformed, extending the day’s rise from 0.7600 to a two-week high of 0.7641.
Mark Bailey, managing director of house builder Barrett Homes, who is based in Sevenoaks, said: “This is a positive move from the Bank of England and means more good news for homeowners, particularly those on tracker mortgages”.
A man walks past the Bank of England in central London, on August 4, 2016. The British central bank, which announces its decision at 1100 GMT, is widely forecast to cut borrowing costs to a new record low at 0.25 percent.
Bank shares also lost ground, as lower interest rates reduce the amount of money they can make from lending. It was down 1.4 percent at $1.3136 by early afternoon in London, while stock markets rose, as the weaker currency will help numerous country’s multinationals and exporters earn more money overseas.
“High [market] expectations for global monetary and fiscal easing are steadily being met”, said Angus Nicholson, a market analyst at IG Markets in Australia.
Oil prices slipped after gains made earlier in the session and on the previous day as global over-production and unsold crude weighed on markets. Germany’s DAX and France’s CAC 40 both rose 0.6 percent. However, in morning trade in Asia, benchmark Brent crude was trading 0.5% lower.
The Final Word: The market’s attention shifts back to the economic data on Friday with the Labor Department’s highly anticipated nonfarm payrolls report.
“Lenders are keen to lend and will need to be competitive in terms of the rates they offer in order to attract new business”.
German factory orders figures for June, U.K. Halifax house price data and USA trade data are slated for release later in the session.
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Thursday’s initial jobless claims reading showed the number of Americans filing for unemployment benefits unexpectedly rose last week, but still showed a healthy labour market.
