Member Article

Bank of England’s easing sends banks soaring

Markets welcomed action by the Bank of England this morning, as participants mulled over the specifics of the £100billion support program, and details of the “funding for lending” scheme designed to encourage banks to lend to small and medium sized enterprises in the UK. The BoE’s governor Mervyn King and Chancellor George Osborne, speaking at the Mansion House in London, stated that the first emergency liquidity operation would be held next week, and that it would hold at least monthly extended collateral term repo facilities, akin to the LTRO’s offered by the ECB. The support provided to the banking sector ensured shares in the UK’s riskier banks traded substantially higher, with RBS, Lloyds and Barclays all closing higher by 7.9%, 5.2% and 4.2% respectively.

Support for markets may have been provided by speculation that central banks globally may be preparing for coordinated action, in particular the Federal Reserve of the US, given the deterioration of economic data over the last few months. Following a relatively strong start to the day for risk assets, markets lost a bit of momentum in the afternoon partly in response to weaker than expected New York Empire State Manufacturing data.

The market troughed around mid afternoon, and as with previous days, it rallied higher into the close. It finally finished 0.2% higher at 5479, underperforming the French and CAC indices which were higher by around 1.5%.

This was posted in Bdaily's Members' News section by James .