The FTSE 100 jumps after the Bank of England meeting. Here’s what’s next

Jon Smith runs over the takeaways from the Bank of England meeting today and flags up which FTSE 100 stocks he particularly likes.

| More on:
A pastel colored growing graph with rising rocket.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Bank of England met today (20 June), and while the committee decided not to cut interest rates now, there are strong indications that cuts are coming shortly. As a result, the FTSE 100 jumped following the announcement. I think this could be the start of a broader rally in the index, for a few key reasons.

Key information from today

At the meeting today the vote was split 7-2, which means that a couple of members voted for a cut, but not enough for a majority. However, the accompanying statement noted that the decision not to cut was “finely balanced” for some. In my view, this shows me that there were several other members that were close to voting for lowering rates.

In that case, it would almost be a majority and so I think we could see the first cut in August. The FTSE 100 jumped as other investors are starting to factor in cuts this year based on the information today.

The move higher also coincides with the release of May inflation data earlier this week. Inflation is now back at 2%, the target level for the Bank of England. This will ease pressures on businesses, with costs not spiralling higher. I believe this should help to boost profit margins over the coming year.

With inflation back on target and interest rates likely moving lower later this summer, I think the reaction in the stock market is the correct one.

Where the value is right now

The FTSE 100 contains companies from a variety of different sectors. Not all have reacted in the same way to the central bank announcement. Therefore, my focus is on the stocks that could really benefit from a sustained rally.

One example I like is Land Securities Group (LSE:LAND). It doesn’t surprise me that it’s the second best performer today in the index, up 3%.

The group is the largest commercial property company in the UK and has a wide range of tenants. Naturally, when it looks to buy a new site, it has to fund this with some debt. The 2023 results showed a loan-to-value ratio of 35%. So when it borrows this money, the interest rate payable is very important.

With interest rates due to fall, this lowers the cost of funding for the company. Given that the portfolio is currently worth just under £10bn, even a small decrease in the debt cost can make a large monetary difference.

The stock is up 5% already this year, but it’s still a way off the 52-week highs. This makes me think that there is room to run higher, especially on further positive headlines about lower rates.

As a risk, the business is currently loss-making. The pre-tax loss last year was £341m. This was a smaller loss than 2022, but I understand why some investors will shy away from investing in a company that isn’t profitable right now.

A positive runway

I think the momentum from the meeting today will carry on. As a result, I’m thinking about adding Landsec to my portfolio shortly.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Land Securities Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Market Movers

Investing Articles

What do Hargreaves Lansdown results mean for the share price?

The Hargreaves Lansdown share price has surged in recent months on takeover expectations, but what will the recent results mean…

Read more »

Windmills for electric power production.
Investing Articles

Renewables output up 60%, but will the SSE share price go the way of National Grid’s?

The SSE share price makes the company look attractive, but is there a big risk to consider down the road…

Read more »

Investing Articles

The Diploma share price dips despite strong revenue growth. Time to buy?

Diploma is a quality company, but it usually comes with a share price to match. So is the decline after…

Read more »

Investing Articles

2 FTSE 250 shares I want to own before the next UK stock market boom

Paul Summers picks out two very different FTSE 250 stocks that, based on recent news flow, could do very well…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

The 3i Group share price rises after a positive Q1 performance update!

The 3i Group share price is up 1.3% following the announcement of its first-quarter results. This Fool takes a look…

Read more »

Investing Articles

Here’s why the AJ Bell share price is soaring!

The AJ Bell share price took off on 18 July after the company's impressive trading update. Our writer takes a…

Read more »

A front-view shot of a multi-ethnic family with two children walking down a city street on a cold December night.
Investing Articles

As the Frasers Group share price jumps 8% on FY earnings, I’m thinking of buying

The Frasers Group share price has trebled over the past five years, while other retailers have struggled. But the valuation…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Earnings up 20%! But this UK small-cap stock may just be getting started

Are we about to see enduring growth from this UK small-cap business with a rising stock price ahead over the…

Read more »