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Bank of England faces rate decision under pressure
Traders are keenly awaiting the Bank of England’s latest monetary policy announcement, due at midday BST, in which at least a 25 basis point hike is all but guaranteed.
Figures for May published Wednesday showed the stickiness of inflation in the economy, with headline CPI holding steady on the previous month at 8.7% and core inflation accelerating to 7.1% from 6.8%.
U.K. government bonds sold off following the announcement, and the pound weakened.
Stephen Gallo, global FX strategist at BMO Capital Markets, said in a note that a 25 basis point hike Thursday would probably result in a weaker pound “as markets remove interest rate hikes from the curve” — resulting in faster credit growth due to higher borrowing and a widening trade deficit due to increased import costs.
“The second option is to move faster and more aggressively with tightening, by shifting to a series of 50 or even 75bps increments. With core inflation above 7.0% and the policy rate less than 5.0%, the Bank is arguably not restrictive enough,” he said.
Gallo also described the U.K. as already in a “slow moving fiscal crisis” after data Wednesday showed public sector net debt in May exceeded 100% of GDP for the first time since 1961.
— Jenni Reid
CNBC Pro: Markets are running ‘too fast, too quickly’ — buy these cheaper stocks instead, analyst says
U.S. stocks have been red-hot, with the S&P 500 hitting its highest level in over a year.
But Steven Glass, managing director and analyst at Pella Funds Management, says U.S. markets have “run too fast, too quickly.”
Investors can look at cheaper stocks instead, according to Glass. Of the four stocks he named, two are “very cheap,” he said.
CNBC Pro subscribers can read more here.
— Weizhen Tan
CNBC Pro: This Wall Street bank’s stock is expected to double over the next year, Jefferies
Shares of a Wall Street bank are forecast to more than double over the next 12 months, according to Jefferies.
Jefferies’ analysts suggest that large-scale share buybacks of about $4.7 billion over the next three years could help push up the global lender’s stock price.
They expect the bank to generate around $24 billion of profit over the course of 2023 to 2025.
CNBC Pro subscribers can read more here.
— Ganesh Rao
European markets: Here are the opening calls
European markets are heading for a lower open Thursday.
The U.K.’s FTSE 100 index is expected to open 45 points lower at 7,512, Germany’s DAX 80 points lower at 15,845, France’s CAC 37 points lower at 7,512 and Italy’s FTSE MIB 132 points lower at 27,600, according to data from IG.
Investors in the U.K. are focused on the Bank of England’s next monetary policy announcement. The central bank is expected to increase rates as inflation remains stubbornly high.
Other data releases of note today include preliminary consumer confidence numbers for the EU in June.
— Holly Ellyatt
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