European stocks rise as BoE unleashes big rate hike / Photo: Frederic J. BROWN - AFP
European stocks rise as BoE unleashes big rate hike
European stocks rose Thursday as the Bank of England delivered its biggest interest rate hike in 27 years and traders tracked Chinese military drills around Taiwan.
Although economists had anticipated the 0.50-percentage point rise, the UK central bank also grimly predicted the country would dip into a lengthy recession later in the year.
The rate hike mirrored aggressive monetary policy from the US Federal Reserve and the European Central Bank last month, as the world races to cool red-hot inflation that has been fuelled by Russia's invasion of Ukraine.
Underscoring the urgency, the Bank of England also predicted that UK inflation would peak this year at just over 13 percent, its highest level since 1980.
Analyst Kallum Pickering, from Berenberg, said the UK central bank's moves would "contribute to a further tightening of UK financial conditions".
"While this will do little to dampen the likely further rise in inflation near-term, it should help to contain inflation expectations. This will reduce the risk that high inflation persists once its mostly external triggers have faded," he said.
After the rate hike announcement, the British pound sank 0.7 percent versus the euro and dollar as dealers fretted over the gloomy outlook.
In mid-afternoon trading, shares in London were 0.2 percent higher, while Paris and Frankfurt were both nearer one percent higher.
Wall Street stocks treaded water early on ahead of key US jobs data.
- Oil tumbles -
Oil prices tumbled with the main US oil contract falling back down to levels not seen since before the war in Ukraine sent crude prices soaring.
The drop comes after a decision by the OPEC+ oil cartel, led by Saudi Arabia and Russia, a day earlier to undertake just a small increase in production.
US energy data also revealed unexpectedly weak gasoline demand.
"The oil market is a mixed bag as demand destruction is met with limited spare capacity," said Edward Moya, analyst at OANDA trading platform.
Most Asian indices tracked a Wall Street rally the previous session fuelled by healthy economic and earnings data, despite lingering Taiwan concerns.
New York surged Wednesday after a report on the crucial US services sector showed surprise improvement, soothing recession fears in the world's top economy.
Markets have swung this week after a number of Federal Reserve officials lined up to suggest there were still some big US rate hikes likely and talk of cuts next year might be overdone.
- Pelosi visit -
The mood in Asia was also a lot more settled after the upheaval of this week's visit to Taiwan by US House Speaker Nancy Pelosi, which sparked outrage in China with warnings of stern military and economic responses.
Beijing has suspended a limited amount of cross-strait imports and exports, and on Thursday began its largest-ever military exercises encircling Taiwan that are expected to last for days.
Soon after, Taiwan's defence ministry said it was "preparing for war without seeking war".
Taipei stocks fell again on worries that the Chinese manoeuvres would hit shipping lanes and flights into Taiwan.
- Key figures at around 1345 GMT -
London - FTSE 100: UP 0.2 percent at 7,462.37 points
Frankfurt - DAX: UP 0.96 percent at 13,717.96
Paris - CAC 40: UP 0.8 percent at 6,524.47
EURO STOXX 50: UP 0.8 percent at 3,761.31
New York - Dow: DOWN 0.04 percent at 32,787.82
Tokyo - Nikkei 225: UP 0.7 percent at 27,932.20 (close)
Hong Kong - Hang Seng Index: UP 2.1 percent at 20,174.04 (close)
Shanghai - Composite: UP 0.8 percent at 3,189.04 (close)
Euro/dollar: UP at $1.0195 from $1.0166 Wednesday
Pound/dollar: DOWN at $1.2112 from $1.2149
Euro/pound: UP at 84.18 pence from 83.63 pence
Dollar/yen: DOWN at 133.52 yen from 133.86 yen
Brent North Sea crude: DOWN 1.5 percent at $95.28 per barrel
West Texas Intermediate: DOWN 1.4 percent at $89.43 per barrel
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