Pound surges, FTSE falls on Bank of England decision

[NEW YORK] The British pound surged and the London FTSE sagged Thursday after the Bank of England hinted at an early interest rate hike, while global stocks were mixed following disappointing Chinese economic data.

The Bank of England (BoE), as expected, maintained its key interest rate at a record-low 0.25 per cent despite surging inflation. But analysts said despite no change to the rate, the tone of the statement indicated the central bank was readying for a rate rise.

"The accompanying statement contained some hawkish rhetoric with perhaps the most telling line revealing that all MPC members think that rate hikes will be faster than the current market pricing and this has provided the catalyst for a strong move higher in the pound," said David Cheetham, chief market analyst XTB online currency trading platform.

Sterling shot up from around US$1.32 when the decision was announced to over US$1.34 as the currency took "centre stage on the back of a hawkish Bank of England policy statement," as Forex.com analyst Fawad Razaqzada put it.

The gain in the British currency weighed on stocks in London, with the FTSE 100 losing 1.1 per cent.

US stocks were mixed, with the Dow edging to a fresh record, while the S&P 500 and Nasdaq both retreated from consecutive peaks due to weakness in leading tech shares such as Apple, Facebook and Google-parent Alphabet.

An exception to the tech pullback was Tesla Motors, which rose 3.1 per cent after chief executive Elon Musk announced the electric car maker would unveil a heavy transport truck next month. The launch is tentatively slated for October 26.

Analysts cited unexpectedly weak Chinese industrial and retail sales data as a drag on many markets, especially Asia.

Output at factories and workshops expanded six percent last month, the lowest recorded this year and well below the 6.6 per cent forecast.

Retail sales slowed slightly, growing 10.1 per cent, while fixed asset investment increased 7.8 per cent in the January-August period - both well below expectations.

"The main culprit was a slowdown in infrastructure investment, which also weighed on industrial output," Julian Evans-Pritchard, China economist at Capital Economics, said in a research note.

Equity markets in Tokyo, Shanghai and Hong Kong all retreated.

AFP