European markets reverse early gains; BoE decision eyed
City Index May 10, 2011 8:37 PM
<p>European markets saw early gains reverse as the morning progressed, with investors continuing to exert short term trading habits and lower the amount of risky […]</p>
European markets saw early gains reverse as the morning progressed, with investors continuing to exert short term trading habits and lower the amount of risky assets they hold in their portfolios.
The FTSE 100 lost 0.5% by late morning trade, with the miners and financial leading the falls lower, alongside tobacco stocks.
Naturally, however, there were strong eyes cast on the Bank of England interest rate and asset purchase levels decision at 12 noon, and this kept investment flows low for much of the morning session. Whilst no movement is expected on either rates or QE levels, there is a faint chance that the Central Bank could increase asset purchases to help ensure the technical recession which the UK has just entered remains a temporary one.
However, given that inflationary indicators are now slightly worse than expected, this may force the BoE to refrain from acting in this month’s decision. That said, the Bank has surprised before and so traders are slightly hesitant this morning until we see the decision.
UK Industrial Production fell 0.3% in March, as expected, from a previous rate of 0.4% growth. UK manufacturing production, however, surprised to the upside by bouncing back much more vigorously from a fall of 1.1% in February to grow at +0.9%, bearing expectations of 0.5%.
Whilst stocks saw a temporary lift from the release of UK industrial and manufacturing production figures, the lift lasted only a mere 15 minutes until weakness compiled to force the FTSE 100 to trade briefly back below the 5500 level.
All eyes on the Bank of England decision at 12 noon.
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