British stocks depending on interest rate decision

LONDON: BRITISH investors will focus this week on an interest rate decision from the Bank of England amid a smattering of economic data and a dearth of company earnings news.

London's FTSE 100 Index advanced 5.13% over the past week to finish at 5,989.76 points last Friday a massive jump on the back of easing fears over the Greek and eurozone debt crises.

The British central bank will announce its latest decision on Thursday after a two-day gathering of the nine-member monetary policy committee (MPC), with most economists expecting no change.

Policymakers kept the BoE's key interest rate in June at a record low 0.50%, where it has stood since March 2009, as worries over weak economic growth offset high inflation.

Britain's manufacturing sector barely expanded in June, when the purchasing managers' index (PMI) dropped to 51.3 compared with 52.0 in May, according to data from research group Markit on Friday. Any score above 50 indicates growth.

“The UK manufacturing PMI fell to 51.3 in June. The outcome marked the lowest reading since September 2009 and the index is now more than 10 points below its peak of 61.6 in January,” ABN Amro economist Joost Beaumont said.

“We expect growth in the manufacturing sector to have slowed significantly in the second quarter as sluggish domestic demand as well as less vigorous global growth have taken their toll.

“This ... is likely to keep worries about the strength of the recovery at the MPC very much alive, keeping it on the sidelines for some time to come. As such, we expect the MPC to keep the bank rate unchanged at next week's (this week) meeting,” Beaumont said.

British 12-month inflation stood at 4.5% in May, unchanged from April and at the highest level for more than two-and-a-half years and more than double the BoE's target of 2%. AFP