London, England -- (SBWIRE) -- 05/11/2011 -- “The FTSE 100 posted gains of 0.2% on the back of continued support from mining stocks whilst a bullish note from JP Morgan helped to spike M&S’s share price by 3%.

A busy morning session of various company earnings and updates has kept equity traders busy. Earnings from Sainsbury’s topped market expectations, only just, with profits before tax up 9% at £665m. A hike in their dividend of 6.3% to 15.1p fell just short of shareholder hopes however, and is its this factor that has left Sainsbury’s shares relatively unchanged this morning.

A fall in advertising sales, the first time since 2009, has put pressure on ITV’s shares this morning. The broadcaster’s share traded at the bottom of the FTSE 100 performers list, falling 3% as a result.

Sterling leaps on BOE Inflation Report
However, the focus for the day’s trading is the Bank of England’s quarterly inflation report. Today’s inflation report has surprised a few traders. The downgrade in forecast for UK growth from 3.1% to 2.9% had been expected by the market but an upgrade of medium term inflation forecasts to near 2% convinces that a rate hike is feasible before the end of the year. It’s hard not to accept language such as “there is a good chance that inflation will reach 5% later this year, and it is more likely than not to remain above the 2% target throughout 2012” as an indication that the bank is warming to the prospects of a rate hike.

The pound sterling had been sold off in the run up to today’s report on expectation of a growth downgrade, so this element of the report had already been priced in. With the BOE also reaffirming their concerns on inflationary pressures, many in the market have taken that stance as an indication that rates hikes is feasible before the turn of the year. As a result, the pound sterling immediately saw buyers, forcing the sterling dollar cross pair higher to $1.6470.”

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