Share prices in London closed in the green on Thursday, following the Bank of England's decision to cut rates and a suspension by the European Central Bank.
In a split vote, the Bank's Monetary Policy Committee (MPC) voted five to four to cut interest rates by 25 basis points, taking the bank rate to 3.75% from 4%.
Five MPC members, including Governor Andrew Bailey, supported the cut, considering that upside risks to inflation have continued to decline.
AJ Bell's Laith Khalaf said: “A Christmas rate cut will bring some much-needed financial cheer to households and businesses across the country, especially those struggling to keep the show going.
“But there were clear signs of harshness in the minutes of the MPC meeting.”
Khalaf added: “Inflation is now expected to fall back closer to the 2% target in the spring… But this has failed to move the dial significantly for some members of the rate-setting committee.
“The vote to cut rates was still close, with four members wanting to keep rates at 4%… That suggests they may be worried about a U-shaped trajectory for (consumer price inflation), settling at a rate above 2% in the medium term.”
The analyst concluded: “Overall, the rhetoric and tone of the committee's minutes seem designed to contain animal spirits. Despite the rate cut, the Bank remains cautious, wary of both persistent inflation and policy errors.”
The FTSE 100 index closed up 63.45 points, or 0.7%, at 9,837.77. The FTSE 250 finished up 160.83 points, or 0.7%, at 22,325.59, and the AIM All-Share closed up 4.88 points, or 0.7%, at 756.36.
In European equities on Thursday, the CAC 40 in Paris closed up 0.8%.
The European Central Bank (ECB) on Thursday left interest rates unchanged, as expected, amid a brighter economic forecast.
The decision leaves the interest rates on the deposit facility, the main financing operations and the marginal credit facility unchanged at 2%, 2.15% and 2.4%, respectively.
Richard Carter of Quilter Cheviot said: “The ECB's decision to hold rates comes as no surprise to anyone, and 2026 is likely to be equally uneventful unless there is a significant change in the economic outlook.
“Most economists expect rates to remain unchanged over the next year, particularly after Christine Lagarde reaffirmed her confidence that current monetary policy is well positioned.
“While a rate cut cannot be completely ruled out if inflation continues to surprise to the upside, any move is likely to be minimal for the foreseeable future.”
The pound was trading higher on Thursday at $1.3387 at the close of the London Stock Exchange, up from $1.3359 on Wednesday. Just before the bank's rate decision I had bought $1.3356.
The euro stood at $1.1730, down from $1.1749. Against the yen, the dollar was trading lower at 155.46 yen compared to 155.55 yen.
Stocks in New York rose. The Dow Jones Industrial Average rose 0.9%, the S&P 500 Index rose 1.4% and the Nasdaq Composite rose 1.9%.
The 10-year US Treasury yield was quoted at 4.11%, narrowing from 4.17%. The 30-year US Treasury yield was quoted at 4.79%, narrowing from 4.83%.
Brent oil rose to $60.23 per barrel at the close of the London Stock Exchange on Thursday, compared to $59.91 on Wednesday.
Gold rose to $4,370.61 an ounce from $4,326.25.
Back on the London Stock Exchange, Whitbread led the FTSE 100, up 6% after activist investor Corvex Management LP took a more than 6% stake in the Bedfordshire, England-based hotel and restaurant owner.
Corvex said the Premier Inn owner is trading at a discount not only to its “fundamental value” but also at a discount to the value of its UK hotel portfolio alone, and urged Whitbread to commission a third-party strategic review of its capital allocation priorities.
In response, a Whitbread spokesperson said the company “has a clear strategy and business model, and our five-year plan is designed to deliver strong returns to shareholders through growth in both the UK and Germany.”
Referring to the UK Government's Budget announcement last month, which increased business rates for some properties, the spokesperson said: “We are managing our business for the long term but remain flexible and, as we indicated in our announcement on 28 November, we are exploring various options to further boost profits, margins and returns in light of the impact of the measures on the UK Budget.”
BP rose 0.1%. The London-based oil company's chief executive, Murray Auchincloss, will resign on Thursday and will be replaced by Woodside Energy boss Meg O'Neill.
Carol Howle, currently BP's executive vice president of supply, marketing and shipping, will serve as interim CEO until O'Neil joins on April 1, 2026.
O'Neill has been CEO of Woodside Energy since 2021, where she oversaw the acquisition of BHP Petroleum International.
On AIM, Tekmar rose 19%. The provider of technology and services to the marine energy industry announced it had won a “significant contract award” worth more than $8 million with an existing engineering, procurement and construction client.
Tekmar will provide its services to a “major UK offshore wind farm” and said the deal reflects its “track record in delivering reliable and technically sound protection technology”.
Small-cap Topps Tiles lost 6.3%, after the tile retailer went ex-dividend, meaning new buyers don't qualify for the latest payout.
However, its shares are still 14% higher year to date.
The biggest risers on the FTSE 100 were Whitbread, up 146.3p to 2,591.3p; Rolls-Royce, up 42 pence to 1,144 pence; Rentokil Initial, up 15.8p to 448.5p; Melrose, up 14.8p to 565.4p; and Smiths, up 62p to 2,394p.
The biggest fallers on the FTSE 100 were United Utilities, down 18p to 1,185p; GSK, down 21p to 1,812.5p; Bunzl, down 18.4p to 420.4p; Pershing Square, 36p to 4,932p; and Coca-Cola Europacific, which fell 50p to 6.88p.
In Friday's economic calendar, the UK has consumer confidence, retail sales and public sector net borrowing.
In Friday's UK corporate calendar, Carnival and WH Smith publish their annual results.
Contributed by Alliance News.
