CBI chief economist Rain Newton-Smith welcomed the cut in rates and said: “The Bank’s action will help restore confidence in the United Kingdom economy and what’s now most important to businesses is that the government develops a clear plan and timetable for European Union negotiations”.
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Ten-year United Kingdom government bonds were little changed after a two-day decline, with yields close to their highest in a week, at 0.80 percent.
The British pound traded at $1.3325, keeping some distance from its three-decade low of $1.2798 hit nearly a month ago, although currency markets may be somewhat ambivalent over how to react to the BoE decision – buy sterling if the BoE cuts, sell if it doesn’t, or vice versa?
Quincy Krosby, market strategist at Prudential Financial, said investors were playing it safe as they waited for the Labour Department’s July employment report. Hiring in June was stronger than expected, but that followed shockingly weak job growth in May.
On Wall Street, the Dow Jones industrial average slipped 2.95 points to 18,352.05 while the Standard & Poor’s 500 index edged up 0.46 points to 2,164.25.
They include cutting the benchmark interest rate from 0.5 percent to 0.25 percent and buying more government bonds with newly created money to pump tens of billions of pounds into the economy.
Not surprisingly, United Kingdom finance minister Philip Hammond welcomed the stimulus measures announced by the Bank of England.
Some commentators suggest this may mean gold going as high as US$1,800 an ounce, but there was a voice of caution today in the shape of RBC. The euro gained 0.1 percent to $1.1143, set to end the week 0.2 percent lower.
SQUARE ONE: Mobile payments company Square climbed after it reported strong second-quarter results and raised its projections for the year. It stands around 2.7 per cent off the three-decade lows hit in the days after the Brexit vote.
An overnight rally in crude oil prices also sharpened investors’ risk appetite, but caution before the July U.S. non-farm payrolls report later on Friday kept gains in check. It’s on track for a 0.4 percent gain for the week.
TRIPADVISOR TUMBLES: Travel website operator TripAdvisor reported lower revenue growth and profit margins in the second quarter, disappointing analysts. Callaway surged 64 cents, or 6 percent, to $11.22.
Brent crude, which is used to price global oils, added 45 cents, or 1 percent, to $43.55. The Chicago Board Options Exchange (CBOE) Volatility Index fell 3.4% to 12.42. Copper lost 2 cents to $2.17 a pound.
“While the forward guidance of more easing was quite explicit yesterday, it really only amounts to a signal of a further 15 basis points of easing down to 0.10 percent”, said Derek Halpenny, European head of global market research at bank of Tokyo-Mitsubishi UFJ in London. Germany’s DAX was up 0.7 percent to 10,245 and France’s CAC 40 gained 0.5 percent to 4,343. Hong Kong’s Hang Seng HSI, +1.29% rose 1.1%.
Sterling went in the opposite direction, tumbling 1.5%, or almost 2 cents, against the USA dollar to stand at 1.31.
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The dollar was effectively flat at 101.185 yen, on track to fall 0.8 percent on the week.
