Yesterday’s news that US inflation eased slightly triggered a mixed reaction on Wall Street, with the S&P 500 rising 0.2% and the Nasdaq falling 0.6%. However, investors were in a brighter mood across Europe on Thursday with all of the major indices moving higher.
The FTSE 100 advanced 0.5% to 7,779, propped up by pharmaceuticals, consumer goods and some financials. All eyes now switch to the Bank of England which will announce its latest interest rate decision at midday. A 0.25 percentage point increase to 4.5% is widely expected, putting the country’s base rate at its highest level since 2008.
Russ Mould, investment director at AJ Bell, said: “Inflation is proving stickier than hoped, pay growth is rising faster than previously expected and the economy is perhaps in a better shape than many thought it would be six months ago, all giving the Bank of England reason to keep pushing up rates.
“While consumer spending has been more robust that one might expect, given the circumstances, the more the cost of borrowing goes up, the greater the chance for consumer spending to weaken. The Bank of England will be acutely aware of the risks of pushing up rates, but the signals so far suggest it will continue this path in the near-term in the fight against inflation.
“Vodafone’s announcement of a closer working relationship with Emirates Telecommunications – also known as e& – didn’t move the share price, but it certainly won’t go unnoticed by fans of the telecoms sector.
“Emirates has been steadily raising its stake in Vodafone and now owns 14.61%. An agreement is in place for Emirates not to take that stake beyond 24.99% but one has to speculate that greater collaboration between the two groups might ultimately lead to a takeover of Vodafone. Its share price has been in the doldrums for years, so being taken private might be the best outcome for long-suffering shareholders.”