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.
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The MPC launched the Term Funding Scheme to make sure that the lower levels of interest rates now set by the BOE are reflected in the costs commercial banks charge households and companies to borrow funds.
Quincy Krosby, market strategist at Prudential Financial, said investors were playing it safe as they waited for the Labour Department’s July employment report.
Growth this year was forecast at 2%, unchanged from May’s outlook after a much stronger than expected second-quarter growth figure made up for a slowdown after the European Union referendum. “Carney said these banks had ‘no excuse” not to pass them on. “In response, both gilt yields and sterling have fallen, while equity markets have moved higher”. China’s Shanghai Composite Index edged up 0.1 percent to 2,982.43.
STIMULUS IN THE UK: The Bank of England cut interest rates to new lows and unveiled a raft of stimulus measures that include resuming a bond-buying stimulus program to pump money into the economy and launching a program of cheap lending to banks.
The Bank has also announced measures to bolster Britain’s economy to address concerns that the country’s decision to leave the European Union could weigh on growth in the coming months.
Brent crude was down 0.26 percent at $42.99 a barrel, while US crude was up 0.24 percent at $40.93.
Business chiefs in Lancashire have welcomed the Bank of England’s move to slash interest rates for the first time in more than seven years and deliver an emergency package worth up to £170 billion to ward off recession.
Further policy loosening in the United Kingdom helped push European shares up 0.6 per cent, while the dollar rose 0.2 per cent against a currency basket, drawing strength from a stronger-than-expected ADP jobs number on Wednesday.
Asian stocks rose Friday following a British interest rate cut as investors looked ahead to USA data that are expected to show faster job growth in July. Brent crude, which is used to price Global oils, dropped 6 cents to $43.04 a barrel in London.
The price of gold rose $2.70 to $1,367.40 an ounce. Copper lost 2 cents to $2.17 a pound.
The pan-European STOXX600 index was up 0.5 percent.
In London, the FTSE 100 gained 1.59% to end the day at 6,740.16. In the eurozone, Frankfurt stocks won 0.6 percent and Paris gained 0.2 percent in value.
Oil prices rose for a second straight day and USA crude advanced firmly above the $40 a barrel mark on short-covering and after a modest stockpile drop at the delivery hub for US crude futures.
Japan’s Nikkei advanced 0.3 per cent, on track for a loss of 1.6 per cent for the week.
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Benchmark 10-year U.S. Treasury yields US10YT=RR hit a more than one-week high of 1.587 percent, while two- US2YT=RR and three-year yields US3YT=RR hit one-week highs of 0.726 percent and 0.847 percent, respectively.
