The FTSE took a breather after the Bank of England (BoE) sounded reasonably dovish at Thursday’s MPC meeting.
However, the appetite in UK stocks remained short-lived as the global deterioration in risk sentiment, combined with the sell-off in oil and commodities discouraged fresh bids.
The banking sector is suffering the heaviest losses in London. The Royal Bank of Scotland (LON:RBS) (-4.74%) leads losses, followed by Barclays (LON:BARC) (-1.86%), Standard Chartered (LON:STAN) (-1.81%) and Lloyds (LON:LLOY) (-0.97%).
BoE dovishness partially priced in
As expected, the BoE kept the bank rate unchanged at 0.25% and confirmed its £435 billion worth asset purchases programme. Although the knee-jerk Brexit impact on growth was less severe than expected, the decline in business investments and looming political and practical uncertainties would keep most of the members on track for a further rate cut this year.
Despite the BoE’s dovish stance, the GBP/USD held ground at 1.3179, while the euro-pound rebounded lower from 0.8539.
The market assess no more than a 27% chance for a rate hike to concretise in December, and only 35% until September 2017.
Fed expectations soften on data
In the US, the Federal Reserve (Fed) hawks are set to close the week disenchanted.
The retail sales unexpectedly contracted by 0.3% on month to August, while industrial production slowed by 0.4% month-on-month, pulling the Federal Reserve (Fed) rate hike probability lower to 18% at next week’s policy meeting. The odds for a December rate hike eased below 50%.
Due today, the US inflation is expected to have slightly picked up in August. Softer than expected inflation should further hit the Fed hawks and take the pressure off the US stocks before the weekly closing bell.