European stocks climb as Bank of England leaves interest rates on hold

LaToya Harding
·3 min read
The Bank of England voted unanimously to leave UK interest rates unchanged at 0.1%. Photo: Luke MacGregor/Reuters
The Bank of England voted unanimously to leave UK interest rates unchanged at 0.1%. Photo: Luke MacGregor/Reuters

European stocks closed higher on Thursday after the Bank of England (BOE) voted unanimously to leave UK interest rates unchanged at 0.1%, as widely anticipated.

The Bank’s monetary policy committee also left its £895bn ($1.24trn) quantitative easing programme unchanged, meaning it will continue to buy up to £875bn of UK government bonds (and hold £20bn of corporate debt).

The FTSE 100 (^FTSE) ended 0.25% up while the French CAC (^FCHI) edged 0.13% higher. The German DAX (^GDAXI) closed at an high-time time, advancing more than 1.23%.

The Federal Reserve also committed to maintaining a dovish monetary policy on Wednesday night.

Paul Craig, portfolio manager at Quilter Investors, said: "The Bank of England is clearly following in the Federal Reserve’s footsteps with regard to tightening or tapering off monetary support. It is still too early to think about these steps and the evolution of the reopening is key. As such, the BOE will be very much focused on the vaccine rollout and continue with the status quo.

“This should result in a tolerated overshoot on inflation. But what a difference a few weeks make as the market has shifted from fretting about negative interest rates at the last meeting, to now discussing when we are likely to see rate hikes.

READ MORE: Bank of England leaves interest rates unchanged

It comes as the European Medicines Agency (EMA) has concluded that the Oxford-AstraZeneca (AZN.L) COVID-19 vaccine is “safe and effective” for use.

The review from the medicines regulator comes after a string of European countries suspended their rollouts of the vaccine after fears it caused blood clotting.

WATCH: European stock markets mixed as Bank of England leaves interest rates unchanged 

The EMA said it would continue to study possible links between rare blood clots and the vaccine. Around 5 million Europeans have already received the AstraZeneca jab.

Earlier on Thursday the World Health Organisation, which is set to release its own results of the vaccine’s safety, again backed the AstraZeneca jab after doing so on Wednesday.

WHO Europe director Hans Kluge said: "Benefits of the AstraZeneca vaccine outweigh any risks and its use should continue to save lives."

READ MORE: AstraZeneca 'under pressure' as Europe reviews COVID-19 vaccine

Across the pond, the S&P 500 (^GSPC) dipped 0.52% at the European close, and the tech-heavy Nasdaq (^IXIC) fell 1.60%.The Dow Jones (^DJI) edged 0.38% higher.

Yesterday the Fed also projected a rapid jump in US economic growth this year as the COVID-19 crisis eases.

While inflation is expected to reach 2.4% this year, above the central bank's 2% target, Fed chair Jerome Powell called it a temporary surge that will not change the Fed's pledge to keep its benchmark overnight interest rate near zero.

US Treasury bond yields dipped back a little, having hit 13-month highs.

WATCH: Fed raises 2021 GDP forecast

Asian shares likewise rose overnight, with MSCI's broadest index of Asia-Pacific shares outside Japan ending higher.

The Nikkei (^N225) climbed 1.01% while the Hang Seng (^HSI) jumped 1.2% and the Shanghai Composite (000001.SS) gained 0.51%.

Teresa Kong, head of fixed income and portfolio manager at Matthews Asia, said the Fed’s reluctance to slow its asset purchase stimulus programme lifted stocks.

“If the Fed isn’t going to induce tightening, it’s very bullish for risky assets,” she said. “We should be seeing a mild rally in Asian assets and currencies.”

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