FTSE 100 needs more than one cut from the BOE

The FTSE 100 touched 8,300 yesterday, peaking at 8,301.78. The noted slide that followed saw it fall back to a low at 8,144.25. It later closed at 8,166.68 and in relative terms, that 5.71 point loss on the day made it by some margin the best major European performer on the day. That is not to conceal the fact that it handed back almost 2% from the gains seen earlier in the day. Now later this morning the Bank of England is almost certain to lower interest rates in response to the UK budget last week. However, as noted here this morning, it might not be that reduction which matters most. It will more likely be if the Bank indicates there is another cut to come next month. Perhaps we should not exclude the possibility of a deeper cut today, no matter how unlikely that may seem. The thing is; with serious doubts in place now on the outlook for the UK economy after the massive tax hikes last week, the FTSE 100 surely needs more assistance from the BOE and certainly more than just a 0.25% rate reduction. As also noted, the problem for monetary policy is ensuring that massive borrowing requirement is able to attract overseas buyers at upcoming Gilt (UK Government bonds) auctions and that might require elevated yields. It is going to be tough times ahead in that respect and that is surely a major headwind for the FTSE 100. That said, the index is poised to a little higher shortly this morning, currently at around 8,190