What’s happening: British stocks fell on Thursday despite the Bank of England adding an extra £100 billion into the economy.
What happened: The Bank of England announced yesterday the expansion of its bond buying program by £100 billion pounds to support the country’s economy from the impact of the coronavirus crisis, bringing the value of the bank’s APF (Asset Purchase Facility) to £745 billion.
The central bank also left its main lending rate unchanged at 0.1% and gave a more positive economic forecast than it had done in May. Despite these moves, investors were not pleased.
Why it matters: The British economy is struggling to recover from a significant 25% contraction in March and April due to lockdowns imposed by the government to slow the spread of the pandemic.
The Bank of England has lowered interest rates twice from 0.75% since the beginning of the covid-19 outbreak. The central bank has, however, decided to not take rates into negative territory, keeping them steady at 0.1%.
Although the central bank added to its bond-buying program, the pace of asset purchases has slowed, exerting pressure on UK indices trading yesterday. Bank of England Governor Andrew Bailey indicated that the decision to lower the pace was taken due to signs of recovery in the British economy and some stabilisation of the financial markets.
London’s FTSE 100 fell 0.47% on Thursday. The commodity-heavy index has recovered over 25% from the pandemic-related sell-off in March.
Among individual stocks, shares of Taylor Wimpey declined around 6% after the homebuilder announced plans to raise £522 million in a share sale. Carnival Corp’s shares were down around 1% after the company reported a net loss of $4.4 billion in its latest quarter. Prudential’s shares bucked the trend and rose more than 3% after the company announced plans to sell a stake in its US business for $500 million.
What to watch: Markets await retail sales data from the UK, which dipped 18.1% in April and is expected to grow 5.7% in May.
Investors will continue to keep an eye on coronavirus numbers, with the UK being the fifth worst affected nation in the world from the pandemic. Britain has reported more than 301,930 confirmed cases and around 42,370 deaths.