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FTSE moves lower as Bank of England holds firm on policy

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Bank of England governor Andrew Bailey. Photo: PA
Bank of England governor Andrew Bailey. Photo: PA

The FTSE 100 moved lower on Thursday afternoon in London, as the Bank of England announced it had left its policy unchanged

The move met expectations that it would keep its interest rate and bond buying programme the same as the economy heads on to more steady footing. 

"Despite the quick economic recovery, officials at the central bank fear a sharp rise in unemployment as benefits are withdrawn by the end of September and Covid cases rise with the rapid spread of the ill-famed delta variant," said Naeem Aslam, chief market analyst at AvaTrade.

"BoE officials have stated that they would soon release guidance on how they plan to phase out the massive bond purchases and raise the policy rate. Investors in the US can use this guidance as a proxy for how the Federal Reserve would react in coming months."

The FTSE 100 (^FTSE) was 0.2% lower by the close. Over on the continent, the DAX (^GDAXI) was 0.3% up and the CAC (^FCHI) was up 0.5%. 

The FTSE fell even in the face of strong first-half earnings reports. Rolls-Royce (RR.L) topped the FTSE 100, moving around 4.6% higher by the end of the day off the back of a cheering set of financial results. 

Read more: Bank of England hold policy unchanged as debate over stimulus heats up

"There is no question that Rolls-Royce continues to face significant challenges due to the slow summer for aviation given its recent decision to ask its 19,000 staff to take unpaid leave for two weeks as it strives to preserve cash," said Michael Hewson, chief market analyst at CMC Markets. 

"The liquidity position remains strong with £3bn [$4bn] in cash at the end of the half year, with the signing a two-year extension to its unused £1bn loan facility to 2024."

Comms company WPP (WPP.L) and manufacturer Mondi (MNDI.L) also headed higher on strong results, rising 3.1% and 3.2% by the end of the day respectively. 

US stocks were higher by the closing bell in London. The S&P 500 (^GSPC) and the Dow (^DJI) were up 0.5% and 0.6% respectively. Meanwhile, the Nasdaq (^IXIC) was 0.7% higher. 

The moves higher come following a disappointing ADP jobs report, which missed expectations, setting a sombre tone ahead of the non-farm payroll data set to be released on Friday.

According to the ADP report, 330,000 new jobs were added in July, compared with the 695,000 predicted. 

The majority of the new jobs were created in the service sector. The rate of new job creation has slowed to its lowest level in nearly five months.

Overnight Asian markets were mixed. In Japan, the Nikkei (^N225) headed half a per cent higher. The SSE Composite (000001.SS) fell 0.3% and the Hang Seng (^HSI) was around 1% lower. 

Markets have been calmer in Asia this week, following panic over a Beijing-led regulatory crackdown on education and tech stocks. 

Watch: Will interest rates stay low forever?

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