ROME: The Bank of England has trimmed its growth outlook due to slowing emerging markets, leaving London stocks in the red while eurozone stocks gained ground.
While the BoE sees the British economy slowing to 2.5 per cent growth in 2016 from 2.7 per cent this year and a bout of negative inflation, it made no indications about increasing monetary stimulus and left its key interest rate at a record-low 0.50 per cent.
That helped to push down London’s benchmark FTSE 100 index 0.8 per cent compared with Wednesday’s close to 6,364.90 points at the close.
“When looking at UK economic data alongside US economic data there does appear to be a much more compelling case for raising rates in the UK than there does in the US, yet all the talk is about the prospect of a US rate rise next month,” Michael Hewson, chief market analyst at CMC Markets UK, said.
However, the BoE only noted that market expectations for it beginning to raise interest rates had been pushed back to the first half of 2017, compared with mid-2016 back in August.
It expressed confidence that such a delay would be sufficient to support domestic demand and gradually bring inflation back up despite global weakness.
“Following yesterday’s upside moves in global equity indices, the FTSE is underperforming its European peers,” Brenda Kelly, head analyst at London Capital Group, said.
In contrast to London, Frankfurt and Paris ended the day higher.
Frankfurt’s DAX 30 won 0.4 per cent to 10,887.74. But there was no respite for Volkswagen, which shed another 2.9 per cent after German prosecutors launched an investigation into new allegations that the firm lied about the carbon dioxide emissions of up to 800,000 cars, adding to a pollution-cheating scandal.
Paris’ CAC 40 index climbed 0.6 per cent to 4,980.04 having earlier just breached the 5,000 mark.
European airline share prices saw no turbulence from the decision of Britain and Ireland to suspend air links to Sharm el-Sheikh over concerns a Russian flight home from the Egyptian tourist resort may have been brought down by a bomb.
IAG, the parent company of British Airways, climbed 0.2 per cent.
Lufthansa, which also cancelled flights to Sharm el-Sheikh on Thursday, lost 3.8 per cent in Frankfurt.
In foreign exchange, the euro fell to a three-month low at $US1.0834, but later rebounded to $US1.0867 from $US1.0865 late on Wednesday in New York.
The British pound held steady against the US dollar until the BoE decision, after which it slumped around 1 per cent.
