Stocks rally, pound drops as Bank of England backs stimulus

AP News
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Posted: Aug 04, 2016 7:41 AM
Stocks rally, pound drops as Bank of England backs stimulus

SEOUL, South Korea (AP) — Global stocks rose and the British pound fell Thursday after the Bank of England unveiled stimulus measures to help the economy deal with the uncertainty over the vote to leave the European Union.

KEEPING SCORE: Britain's FTSE 100 rose 1 percent to 6,698 after trading flat before the central bank's announcement. Germany's DAX was up 0.7 percent to 10,245 and France's CAC 40 gained 0.5 percent to 4,343. Futures augured gains on Wall Street, with Dow and S&P futures both up 0.2 percent.

UK STIMULUS: The Bank of England cut its key rate to 0.25 percent from a previous record low of 0.5 percent to help the economy, which has seen business activity slump since the June 23 vote to leave the EU. It is also injecting an additional 60 billion pounds ($79 billion) in new money into the economy through a bond-buying scheme, and it will buy up to 10 billion pounds in U.K. corporate bonds. The measures overall seemed to be more than most analysts had expected, causing stocks to rise and the pound to drop.

ANALYST'S TAKE: "The injection of extra liquidity demonstrates how serious the (Bank of England) views the potential economic damage done by the Brexit vote," said Jake Trask, currency analyst at UKForex.

ASIA'S DAY: After trading lower in the morning session, Japan's Nikkei 225 finished 1.1 percent higher at 16,254.89. South Korea's Kospi added 0.3 percent to 2,000.03 and Hong Kong's Hang Seng index gained 0.4 percent to 21,832.23. China's Shanghai Composite Index edged up 0.1 percent to 2,982.43. Stocks in Taiwan, Singapore, Indonesia and other Southeast Asian markets finished higher.

OIL: Benchmark U.S. crude lost 14 cents to $40.69 per barrel in New York. The contract jumped $1.32 a barrel on Wednesday after the U.S. government said stockpiles of gasoline shrank by more than 3 million barrels last week. Brent crude, which is used to price international oils, dropped 34 cents to $42.76 a barrel in London.

CURRENCIES: The pound fell 1.5 percent to $1.3132 by early afternoon in London. The dollar edged up to 101.31 yen from 101.28 yen while the euro fell to $1.1119 from $1.1148.