(Alliance News) - Stock prices in London were sharply higher at midday Thursday, as investors welcomed the Bank of England's decision to hold interest rates steady despite warning that inflation will rise further amid energy market disruption linked to the Middle East conflict.
The FTSE 100 index was up 127.59 points, 1.3%, at 10,340.70. The FTSE 250 was up 176.33 points, 0.8%, at 22,377.20, and the AIM all-share was up 4.59 points, 0.6%, at 793.02.
The Cboe UK 100 was up 1.4% at 1,030.76, the Cboe UK 250 was up 0.9% at 19,466.42, and the Cboe small companies was up 0.7% at 18,095.52.
The Bank of England held interest rates steady, keeping Bank Rate at 3.75% following its latest meeting.
The Monetary Policy Committee said inflation has risen to 3.3%, higher than it had forecast in February before the outbreak of war in the Middle East, and warned that it expects inflation to climb further later this year.
Policymakers pointed to the conflict's impact on energy markets, noting that disruption to the transportation and supply of energy has pushed up global prices. This has already fed through to higher motor fuel costs for households, and the Bank said utility bills are also likely to rise.
The MPC cautioned that energy price increases could generate broader knock-on effects. As businesses face higher costs, they may seek to pass them on through higher prices. At the same time, workers may push for stronger wage growth to offset rising household bills.
The pound was quoted at USD1.3526 midday Thursday, compared to USD1.3491 Wednesday. Against the euro, sterling rose to EUR1.1541 from EUR1.1530 a day prior. The euro stood at USD1.1716, against USD1.1659. Against the yen, the dollar was trading at JPY157.15, lower compared to JPY160.24.
Brent crude for June delivery was trading at USD116.63 a barrel early Thursday, little changed from USD117.20 late Wednesday, as markets continued to track developments in the Middle East.
Diplomatic efforts remain in focus. Pakistan could receive a revised peace proposal from Iran by Friday, according to sources, as attempts to restart stalled negotiations gather pace. US President Donald Trump reacted to the deadlock by warning that Iran "better get smart soon", posting a mocked-up image of himself holding a gun on his Truth Social platform.
Separately, Trump and Russian President Vladimir Putin held a 90-minute phone call covering the Iran ceasefire and other issues. Trump later said Putin had offered to help address Iran's uranium stockpiles, adding a further diplomatic dimension to the ongoing crisis.
In European equities on Thursday, the CAC 40 in Paris was down 1.1%, while the DAX 40 in Frankfurt was up 0.4%, as investors digested fresh eurozone data ahead of the European Central Bank's rate decision at 1315 BST. The ECB is widely expected to leave its deposit rate unchanged at 2.00%.
Data from Eurostat showed consumer price inflation in the eurozone accelerated in April, even as economic growth slowed in the first quarter. The consumer price index rose 3.0% on-year in April, up from 2.6% in March and above the FXStreet-cited consensus of 2.9%.
Energy prices were the main driver, with consumer energy costs jumping nearly 11% on-year after a 5.1% rise in March, reflecting the impact of the US-Israeli war on Iran and disruption to oil supplies.
Back in London, United Utilities led the FTSE 100, surging 11% after reporting sharply higher annual profit and unveiling a GBP800 million equity raise to support increased investment.
The Warrington-based water and wastewater utility said pretax profit more than doubled to GBP779.0 million in the year to March 31 from GBP355.0 million a year earlier. Operating profit climbed 74% to GBP1.10 billion, while revenue rose 22% to GBP2.62 billion.
United Utilities plans to increase its AMP8 investment programme by GBP2.5 billion, taking total capital expenditure to GBP11.5 billion, and launched a share offer to help fund the expansion. The company also declared a higher dividend and guided for further revenue growth in financial 2027.
Severn Trent rose 6.7%, benefiting from read-across from its sector peer United Utilities' strong update.
Rolls-Royce Group was also among the top performers, up 5.9%, after maintaining its 2026 outlook despite disruption linked to the Middle East conflict.
Whitbread, by contrast, fell 3.5% after reporting lower annual pretax profit and unveiling a new five-year plan that is expected to result in around 3,800 job losses.
The Dunstable-based hotel and restaurant operator said pretax profit dropped 19% to GBP298 million in the 52 weeks to February from GBP368 million a year earlier. The restructuring plan aims to deliver a material step-up in margins and returns by financial 2031, including cost savings, property disposals and lower capital expenditure, while maintaining its dividend and targeting improved shareholder returns.
At the bottom of the index, Weir Group slid 8.7% after announcing that its chief executive will step down, with shares also trading ex-dividend. DCC was down 4.4% after rejecting a takeover approach from a consortium led by KKR.
On the FTSE 250, Pennon Group and Raspberry Pi were both up 5.6%, leading the mid-cap gainers.
At the lower end of the index, several stocks traded ex-dividend. Greggs fell 3.4%, Genuit Group dropped 2.8%, 4imprint Group lost 2.7%, and Sequoia Economic Infrastructure Income Fund declined 2.6%.
Stocks in New York were called mixed ahead of the open. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 up 0.2%, and the Nasdaq Composite up 0.3%.
The yield on the US 10-year Treasury was quoted at 4.40%, widening from 4.39%. The yield on the US 30-year Treasury stood at 4.98%, unchanged from Wednesday.
Gold was quoted at USD4,635.04 an ounce, up from USD4,551.30, as investors continued to seek safe-haven assets amid geopolitical uncertainty.
Still to come on Thursday's economic calendar are US quarterly personal consumption expenditures, GDP data and weekly jobless claims, as well as Canadian GDP figures.
By Eva Castanedo, Alliance News reporter
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