LONDON MARKET CLOSE: Stocks green as BoE faces "balancing act"

(Alliance News) - Stock prices in London closed higher on Wednesday, with a UK rate cut expected ...

Alliance News 5 February, 2025 | 5:07PM
Email Form Facebook Twitter LinkedIn RSS

(Alliance News) - Stock prices in London closed higher on Wednesday, with a UK rate cut expected this week but with hotter inflation forecast.

The Bank of England is expected to enact a 25 basis point rate cut on Thursday, but policymakers face the unenviable balancing act of weighing up a stalling economy with inflation pressure.

The expected quarter-point cut by Threadneedle Street would take bank rate to 4.50%, from 4.75% currently.

The BoE announces its rate decision at 1200 GMT on Thursday, with a press conference with Governor Andrew Bailey following at 1230 GMT.

"The MPC currently faces a tough balancing act. On the one hand, increases in commodity prices, sterling depreciation, and regulated price changes are likely to push up the committee's inflation forecast," analysts at Goldman Sachs said. "At the same time, growth has disappointed the bank's forecasts and survey data point to labour market weakness ahead.

"Moreover, the restrictive policy stance means that the bank's projections will likely continue to imply that bank rate would need to fall notably to avoid a significant rise in unemployment and an inflation undershoot in the medium term."

The FTSE 100 index closed up 52.52 points, 0.6%, at 8,623.29. The FTSE 250 ended up 109.62 points, 0.5%, at 20,762.88, and the AIM All-Share closed up 3.21 points, 0.5%, at 715.58.

The Cboe UK 100 ended up 0.5% at 862.79, the Cboe UK 250 closed up 0.4% at 18,139.44, and the Cboe Small Companies ended up 0.3% at 15,545.47.

GSK, which raised its long-term sales guidance and announced a GBP2 billion share buyback after reporting decreased pretax profit but increased revenue for 2024, led the FTSE 100 with a 7.6% increase.

Diageo led the laggers, down 4.0%. Several brokers including Bank of America and Goldman Sachs have cut their price targets for the company, which said on Tuesday its momentum could be affected by threatened US tariffs on Canada and Mexico.

In European equities on Wednesday, the CAC 40 in Paris ended down 0.3%, while the DAX 40 in Frankfurt ended up 0.2%.

The pound was quoted higher at USD1.2513 at the London equities close on Wednesday, compared to USD1.2481 at the close on Tuesday.

The euro stood at USD1.0414 at the European equities close Wednesday, higher against USD1.0376 at the same time on Tuesday.

Against the yen, the dollar was trading lower at JPY152.33 compared to JPY154.58 late Tuesday.

Stocks in New York were mostly higher at the London equities close, with the DJIA up 0.2%, the S&P 500 index up 1.33 points, and the Nasdaq Composite down 0.2%.

The US trade deficit increased by more than anticipated in December, data published by The Bureau of Economic Analysis.

The country's trade deficit increased by 25% to USD98.4 billion in December from USD78.9 billion in November, the latter which was upwardly revised from previously reported USD78.2 billion. The FXStreet-cited consensus had pencilled in a softer increase to USD96.6 billion for December.

The US service sector continued to grow at the start of 2025, albeit at a steadier pace.

According to S&P Global, companies expressed confidence in the economic outlook and took on extra staff to the largest degree in more than two-and-a-half years.

The seasonally adjusted S&P Global US services purchasing managers' business activity index posted 52.9 in January, down markedly from 56.8 in December but still signalling a solid monthly expansion in business activity in the service sector, and in line with FXStreet consensus of 52.8.

The S&P Global US composite PMI output index posted 52.7 in January, down from 55.4 in December.

Brent oil was quoted at USD74.64 a barrel at the London equities close Wednesday from USD76.19 late Tuesday.

Gold was quoted at USD2,870.03 an ounce at the London equities close Wednesday against USD2,840.78 at the close on Tuesday.

In Thursday's UK corporate calendar, AstraZeneca releases its full-year results.

The economic calendar for Thursday has the Bank of England rate call and the UK construction PMI, plus jobless data from the US.

By Emma Curzon, Alliance News reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2025 Alliance News Ltd. All Rights Reserved.

Email Form Facebook Twitter LinkedIn RSS

Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Diageo PLC 2,235.00 GBX -3.97
GSK PLC 1,485.00 GBX 7.61

About Author

Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.

© Copyright 2025 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures