Europe midday: Investors caught by surprise as BoE stands pat

Investors were caught by surprise on Thursday as the Bank of England decided to leave interest rates unchanged despite concerns about the potential fallout from Brexit.

At midday, the main European indices were off their earlier highs and London’s FTSE 100 turned negative after the BoE announced that it was keeping interest rates on hold at 0.50%. Analysts had been expecting the bank to cut rates for the first time since 2009, by 25 basis points. The pound got a boost, however, trading up 1.7% against the dollar.

The BoE voted 8-1 to keep rates unchanged.

Naeem Aslam, chief market analyst at Think Markets, said: “The Bank of England is not that dovish and bears have been caught badly on the wrong side of the market. Mark Carney was expected to cut the rate today as probabilities were skewed in favour of a rate cut. All bets are for August now as they want to see more data out of the UK and asses the global position.

“Basically they have saved their bullets as they have very limited number of them and want to wait for the right opportunity. The governor needs to meet new Chancellor and wants to get a better understanding of the economy and surely wants to be on the same page before they start firing.”

New UK Prime Minister Theresa May has appointed former London Mayor Boris Johnson as foreign secretary, with Philip Hammond the new Chancellor and Amber Rudd Home Secretary.

In corporate news, information services firm Experian was in the black after it said revenue grew 5% at constant exchange rates in the first quarter.

Recruitment firm Hays surged after saying it expects full-year operating profit to be ahead of current market estimates at around £180m.

Food retailers Delhaize and Ahold were trading higher after agreeing to sell 86 US stores as they look to win approval from the US Federal Trade commission for their merger.

Oil prices advanced on a weaker dollar and following Wednesday’s drop. West Texas Intermediate was up 1.3% to $45.31 a barrel and Brent crude was 1.2% firmer at $46.84.

Still to come, investors will eye the release of US initial jobless claims at 1330 BST.