FTSE rises as BoE hints rate hikes nearing end, China woes weigh

The FTSE 100 closed marginally higher on Thursday following dovish signals from the Bank of England that rate hikes may be nearing an end for now. However, growth anxieties persisted amid weak data from major UK trading partner China.

The UK blue-chip index finished up 0.2% while the more domestic-focused FTSE 250 dipped 0.4%. The pound also retreated as markets trimmed near-term tightening bets.

BoE Governor Andrew Bailey told lawmakers the central bank is “getting close” to the ceiling for rate rises needed as inflation shows early signs of easing. His tone led some analysts to question whether the BoE will hike at all next month.

But in the US, upbeat services data reinforced expectations for sustained Federal Reserve tightening. The dollar strengthened while Treasury yields climbed.

Among UK stocks, aerospace firm Melrose jumped 5% and events organiser Informa surged 8% after well-received results. However, China-linked names fell on weak trade figures suggesting its post-COVID rebound has run out of steam.

In the FTSE 250, small business lending platform Funding Circle jumped 10% despite reporting a pretax loss of £16.6 million in the first half of 2023 compared to a £1.6 million profit the year prior.

Chemicals firm Synthomer plummeted 25% after announcing a large rights issue and steep profit decline amid sliding demand. Vet healthcare providers CVS and Pets at Home dropped 18% and 9% respectively on watchdog competition concerns.

While lower UK rate bets provided upside, Governor Bailey stressed ongoing inflation risks. Tighter policy looks set to continue until price stability returns.

But analysts noted today’s remarks highlight the BoE’s balancing act as growth risks deepen. Some reassessment of aggressively hawkish signalling now appears underway.