Published by Jessica Weisman-Pitts
Posted on August 1, 2022
(Reuters) -UK’s top share index extended its winning run on Monday as HSBC surged after providing an upbeat outlook, while easing inflation expectations raised doubts over the chances of a super-sized rate hike from the Bank of England (BoE) this week.
The blue-chip FTSE 100 climbed 0.5%, hitting fresh seven-week highs as earnings optimism boosted European markets. [.EU]
HSBC jumped 5.9% after Europe’s biggest bank announced a higher profitability target and bullish dividend outlook. It also pushed back on a proposal by top shareholder Ping An Insurance Group Co of China to split itself.
The wider banking index added 3.8%.
Pearson rose 6.8% as the education group reiterated its full-year profit outlook and said its new integrated structure under boss Andy Bird was helping to save costs and grow the top line.
Investors were awaiting the BoE’s policy decision on Thursday. The British public’s expectations for inflation fell again in July, a survey showed on Monday, potentially adding to the case for only a quarter percentage point increase in interest rates.
Hawkish comments from BoE rate-setters recently have raised the prospect for the first half percentage-point rate hike since 1995.
“In our forecast, we expect a 25 bp hike next week to be the last in this hiking cycle, but the risks are now clearly skewed to the upside,” Unicredit analysts said in a recent note.
“The MPC would likely need to see some spare capacity opening up in the labour market in order to feel confident that the risk of high inflation becoming entrenched has diminished. We still think this will happen in 2H22, but uncertainty is very high.”
Another survey showed British manufacturing output and new orders declined in July at the fastest rate since May 2020 as factories across Europe struggled with rising costs and slowing demand.
The domestically focused midcap index gained 0.2%, also holding near seven-week highs hit last week.
Quilter jumped 12.3% after a media report said NatWest Group is considering a bid for the fund manager. NatWest gained 2.1%
(Reporting by Sruthi Shankar in Bengaluru; editing by Uttaresh.V)
