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Thursday was a livelier day in the financial markets as investors digested a raft of economic news from around the globe. As expected, the UK held interest rates at the record low of 0.5%, as fears over the domestic economy offset concerns surrounding inflation. At 4.5% as measured by the consumer price index, inflation is more than double the Bank of England’s 2% target, yet a pessimistic economic outlook has pushed expectations for a rise out into 2012. In contract to this (although equally as predictable) was the European Central Bank’s increase in rates by 25bps to 1.5%. It is hard to justify the more hawkish attitude on the continent as recent leading economic indicators for France and Germany, which have until recently been been performing strongly, are now at multi-month lows. Combined with the severe economic and political problems that plague the peripheral nations of the union, many are questioning whether a rate rise was appropriate. It will be interesting to see how the diverging attitudes towards monetary policy play out.

The rate decisions influenced the currency markets which traditionally react to interest rate decisions, Sterling fell by around 0.3% against both the euro and the dollar.

Within the UK, manufacturing output rose by 1.8% in May, a substantial improvement on the 1.6% drop the preceding month, and again ahead of forecasts. The weak figure in April was largely attributed to supply disruption following the Japanese earthquake, and the unusually large number of public holidays.

This news further contributed to a decidedly bullish mood which saw the FTSE finish up 0.9% at 6054 (crossing the magic 6000 figure for the 23rdtime this year), whilst Brent crude worryingly rose by 3.3% to $116.6/bbl. Confirming the positive macroeconomic sentiment, mining companies performed particularly well as their businesses are naturally geared towards a stronger economy. This resulted in the FTSE, which has an overweight exposure to mining companies, outperforming its European counterparts as BHP Billiton, Anglo American and Rio Tinto all put on more than 2%.

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