FTSE 100 LIVE: London lacks direction as Bank of England set to make tricky interest rate decision

The FTSE 100 (^FTSE) was flat on Thursday morning, while European stocks headed lower, as the Bank of England is set to reveal its latest decision on UK interest rates, which are currently set at 4%.

Although the odds are in favour of a hold, money markets indicate around a one in three chance that the base rate will be cut to 3.75% today. If so, this would be the sixth cut to borrowing costs since August 2024.

But overall, markets and economists expect the central bank to hold the benchmark rate as UK inflation came in lower than expected in September at 3.8% – a small sign that cost of living pressures are starting to cool.

It will announce the decision at 12pm, followed by a press conference led by governor Andrew Bailey half an hour later.

Read more: Bank of England braced for tough call on interest rates

James Smith, an economist for ING, said the bank's Monetary Policy Committee (MPC) was “deeply divided” but would likely remain cautious about the risk of inflation being persistent.

Meanwhile, Andrew Wishart, senior UK economist at Berenberg, said the decision would be a “close call," forecasting a hold by a margin on six votes to three.

“Rising household inflation expectations and the August cut in Bank Rate lowered the real interest rate to zero," he said.

“The drop in financial market interest rate expectations in October may have already turned the real interest rate negative on a forward-looking basis."

“The risk is that a misjudged cut in the nominal rate in November amid elevated inflation causes the Bank of England to lose control of the real interest rate, which would prolong the UK’s inflation problem.”

Policymakers will also have noted that chancellor Rachel Reeves appeared to prepare the ground for tax rises in a pre-budget speech this week. This would be disinflationary, and also hurt growth.

Danni Hewson, head of financial analysis at AJ Bell, said: “It’s possible Rachel Reeves’ surprise press conference on Tuesday was partly a cry for help to the Bank of England. By promising to push down on inflation, she might have been signalling that the Bank didn’t have to wait until after the Budget to cut rates. Whether they do or not is a finely balanced call."

A recent slowdown in wage growth could also persuade some MPC members to vote for a cut today.

London’s benchmark index (^FTSE) was hovering around the flatline in early trade Germany's DAX (^GDAXI) dipped 0.3% and the CAC (^FCHI) in Paris headed 0.7% into the red The pan-European STOXX 600 (^STOXX) was down 0.2% Wall Street is set for a negative start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the red. The pound was 0.1% higher against the US dollar (GBPUSD=X) at 1.3064 after hitting a seven-month low overnight

Story Continues

FTSE Index - Delayed Quote•USD

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9,772.05

-5.03

(-0.05%)

As of 8:42:58 AM GMT. Market Open. Advanced Chart

Follow along for live updates throughout the day:LIVE2 updates

8 mins ago

LaToya Harding

Asia and US overnight

Stocks in Asia bounced back overnight, after Wall Street got a boost from upbeat economic updates and quarterly earnings.

The Nikkei (^N225) rose 1.3% on the day in Japan, despite shares in Nissan Motor (7201.T) losing 1.7% after the company said it was selling its headquarters building in Yokohama to raise cash. Nissan was due to report its earnings later in the day.

Meanwhile the Hang Seng (^HSI) gained 2% in Hong Kong and the Shanghai Composite (000001.SS) was 1% up by the end of the session. In South Korea, the Kospi (^KS11) added 0.6% on the day.

Across the pond on Wall Street, the S&P 500 (^GSPC) rose 0.8% to 6,823.92, recovering from its selloff the previous day, although it did give up about half of the day’s gains in the final hour of trading.

The tech-heavy Nasdaq (^IXIC) was 1.2% higher, closing at 23,616.11, and the Dow Jones (^DJI) gained 0.6% to 47,377.06. The Magnificent 7 climbed 0.9% and outperformed, and it was a good day all round, as the small-cap Russell 2000 rose 1.5%, with more than 60% of the S&P 500 were higher on the day.

The main driver was stronger-than-expected data, alongside growing speculation that the government shutdown might come to an end soon. This helped to boost investor optimism about the near-term outlook, with risk assets doing well across the board

The yield on benchmark 10-year US Treasury notes rose to 4.161%, from 4.091% late on Tuesday.

SNP - Delayed Quote•USD

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6,796.29

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At close: November 5 at 4:38:44 PM EST Advanced Chart 31 mins ago

LaToya Harding

Coming up

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what's moving markets and happening across the global economy.

To the day ahead, one of the main highlights will be the Bank of England’s latest policy decision. There’s also plenty of speakers, including ECB Vice President de Guindos, the ECB’s Kocher, Schnabel, Villeroy, Nagel and Lane, along with the Fed’s Williams, Barr, Hammack, Waller and Musalem. On the data side, we’ll get German industrial production and Euro Area retail sales for September.

Here's a snapshot of what's on the agenda:

7am: Trading updates: AstraZeneca, Diageo, National Grid, Sainsbury’s, Smith & Nephew, BT, Auto Trader, Tate & Lyle, Hiscox, Howden Joinery, Vistry Group, ITV, Derwent London, Watches of Switzerland, HgCapital Trust, Braemar, OSB, IMI 8.30am: Eurozone construction PMI for October 9.30am: UK construction PMI for October 12pm: Bank of England interest rate decision 12.30pm: Bank of England press conference

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