European Markets Pare Gains After Bank of England Keeps Rate Steady

Bank of England defies market expectations and keeps rate at 0.5%
By Mariko Iwasaki ,

European stocks pared earlier gains in midday trading after the Bank of England maintained its rate at 0.5%, defying market expectations that the central bank would step in to calm the post-Brexit vote economy.

Most analysts had expected a 25 basis point cut to a historic-low benchmark rate after keeping the rate at 0.5% for more than seven years.

All European stock indices dipped immediately after the BOE announcement, losing their gains earlier in the day. The FTSE 100 was recently up 0.07% at 6,674.81, while the Dax in Frankfurt was up 0.59% at 9,991.30 and in Paris the Cac 40 was up 0.40% at 4,352.58. Euro Stoxx 50 was up 0.53% at 2,944.23.

A dip after the BOE announcement was noted among the U.K.'s home builders and property developers. They have since regained their losses. Berkeley (BKGFY) was up 1.5%, Taylor Wimpey (TWODY) was up 1.4%, and Barratt Developments was up 2%. 

The central bank noted the impact the referendum has had on the housing market. 

The Monetary Policy Committee's minutes stated, "Regarding the housing market, a preview of the June [housing market] survey had pointed to a marked weakening in expected activity and prices following the referendum result. Bank staff had lowered their forecast of housing investment significantly and had revised down the near-term outlook for house prices."

Trends among media companies varied after the BOE announcement. ITV (ITVPY)  and Sky (SKYAY)   rose after plunging, while Reed Elsevier (RELX) - Get Report , Pearson (PSO) - Get Report  , and UBM (UBMPY)  extended their losses.

UniCredit was up more than 4% in Milan. UniCredit chairman Giuseppe Vita told Reuters the bank will have to consider a capital increase because asset sales concluded this week will not be enough to satisfy the European Central Bank.

Swedish bank SEB was up more than 1% after its second-quarter operating profit beat expectations

BASF (BASFY) was up 2.8% in Frankfurt after a Bloomberg report that Monsanto (MON)  might acquire its agricultural solutions unit. Monsanto is fighting off a bid from Bayer and Monsanto CEO Hugh Grant said earlier this month it was talking with other deal partners. Bayer was recently up 0.5%.

Recruitment consultant Hays was up over 4% in London after forecasting that full-year operating profit will be ahead of expectations at £180 million ($238.2 million) because of currency wins. 

GlaxoSmithKline (GSK) - Get Report was down 0.3% at 1,664.50 pence even as Jefferies upgraded the stock to buy from hold with a price target of 2,000 pence. The shares plunged after the BOE announcement.

Advertising company WPP fell 1%, plunging after the BOE announcement and losing the gains after Liberum analysts cut their organic growth forecasts for the next three years but said currency benefits from the weaker pound will more than offset the decline. It reiterated its hold recommendation and a "cautious stance on agencies."

The pound was recently up 1.89% at $1.3396. The currency surged after the BOE announcement.

Brent crude was recently up 2.2% at $47.29 a barrel.

Gold and silver slipped back, while the yield on the benchmark 10-year U.K. government bond rose 7 basis points to 0.81%.

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