The MPC was unanimous in agreeing to keep interest rates on hold at 0.5%. The decision not to inject more money was seen as a positive sign that the UK economy was recovering and did not need further help from the central bank. Figures out on Friday could show that the UK has exited recession. The Bank agreed that it would not extend its £175bn program of uantitative easing (QE), but would keep it “under review”.
The committee said that QE had had a “substantial” impact, but all members agreed that “recent developments were not sufficiently compelling to justify revising the target level of asset purchases that had been agreed in August”.
The minutes of October’s MPC meeting suggest that the Committee is open to the idea of potentially extending QE once it has revisited its forecasts for November’s Inflation Report. However it questioned the durability of the global recovery and highlighted the possibility of further bad news on bank losses.
The weakening dollar has been one of the catalysts driving stocks and other risk assets higher, and it is a main focus of traders this week as they sort through a deluge of corporate earnings news and watch the dollar shrink to a 14-month low.
The CBOE Volatility Index widely considered the best gauge of fear in the market, popped back above 22, after earlier falling as low as 20.10. The gauge hasn’t been below 20 since August 2008. At the height of the crisis in October and November of that year, the VIX topped 80.
The UK market has opened up down 1% and the European markets are down around 1.5%. U.S futures markets are pointing to a mixed start when their markets resume trading this afternoon. Futures currently forecast the Dow to open up 11 points; with the Nasdaq to open down 5 points and the S&P to open flat.
Sources: Reuters: BBC: Bloomberg: Lawshare: Deutsche Bank (db): Proquote: Financial Times: Wall Street Journal: CLSA: Sharescope: Market News. Capital Economics: CNBC: Wikipedia: GaveKal:
Please note this report provides a guide to some of the relevant areas that individual investors should consider discussing with an authorised adviser in relation to their specific circumstances, it does not constitute individual advice. As a result no action should be taken or refrained from being taken as a result of its content.
