London’s FTSE 100 regains ground as pound slips to three-month low

The UK’s top stocks moved higher on Thursday while the pound faltered after the Bank of England’s chief hinted that UK interest rates could be nearing their peak.

Andrew Bailey told a group of MPs on Wednesday that the UK is “much nearer now to the top of the cycle” based on the current evidence. He also said that UK inflation is expected to fall sharply by the end of the year.

Policymakers will meet later this month to decide whether or not to raise rates further.

The pound fell to its lowest level in three months on Thursday, slipping below 1.25 US dollars.

It was down 0.2% against the dollar to 1.248 when European markets closed, and flat against the euro to 1.166.

Michael Hewson, chief market analyst for CMC Markets UK, said: “The pound has continued to slide today as traders pare bets on the Bank of England hiking rates by as much as expected over the coming weeks and months.

“Judging by recent comments from the likes of governor Bailey, as well as deputy governor (Ben) Broadbent and chief economist Huw Pill, there is a sense the market is being softened up for a rate pause later this month, with the narrative likely to be that rates are likely to stay at current levels until 2025 at the very least.”

London’s FTSE 100 regained some ground after falling into negative territory throughout the week.

It closed 15.58 points higher, or 0.21%, at 7,441.72.

It was a choppier session for other European markets, with Germany’s Dax closing 0.14% lower and France’s Cac 40 rising just 0.03%.

It was a mixed start to trading in the US with the S&P 500 down 0.5% and Dow Jones up by 0.1% by the time European markets closed.

In company news, shares in Melrose Industries leaped to the top of the FTSE 100 after the company upgraded its full-year profit expectations after seeing a surge in revenue for its aerospace arm.

The group said it is “very capable” of producing more than £1 billion in earnings but there is “still work to do”. Its shares were up by 5.3% on Thursday.

Shares in Jet2 also enjoyed a boost after the airline and holiday group said it was on track to beat results forecasts for the year to the end of March thanks to strong summer bookings.

The upgraded profit outlook came despite the firm revealing a hit of about £13 million as a result of the disruption caused by the recent air traffic control failure, as well as wildfires across the Greek island of Rhodes. Jet2’s share price climbed 6.3% at close.

It was also a good session for insurer Direct Line with shares surging by more than 15% amid hopes of a turnaround for the group next year, after it said it slumped to a half-year loss. Its share price closed 15.8% higher.

The biggest risers in the FTSE 100 were Melrose Industries, up 28.2p at 537.2p, Rolls-Royce, up 9.1p at 223.8p, National Grid, up 21.6p at 994.8p, Relx, up 58p at 2,695p, and DCC, up 93p at 4,382p.

The biggest fallers in the FTSE 100 were Smurfit Kappa, down 122p at 3,096p, JD Sports, down 5.05p at 134.25p, DS Smith, down 10.5p at 294p, Prudential, down 29.8p at 903.4p, and Anglo American, down 60.5p at 2,025.5p.