AFP

European stocks pushed slightly higher on Thursday as the Bank of England delivered its biggest interest rate hike in 27 years and traders tracked Chinese military drills around Taiwan.

Although economists had anticipated the 0.50-percentage point rise, the UK central bank also grimly predicted the country would dip into a lengthy recession later in the year.

“The UK economy does not look like it is positioned for a prolonged downturn, so that should allow the mostly hawkish BoE to be aggressive with tightening,” said Edward Moya, from OANDA trading platform.

The rate hike mirrored aggressive monetary policy from the US Federal Reserve and the European Central Bank last month, as the world races to cool red-hot inflation that has been fuelled by Russia’s invasion of Ukraine.

Underscoring the urgency, the Bank of England also predicted UK inflation would peak this year at just over 13 percent, its highest level since 1980.

Analyst Kallum Pickering, from Berenberg, said the UK central bank’s moves would “contribute to a further tightening of UK financial conditions”.

“While this will do little to dampen the likely further rise in inflation near-term, it should help to contain inflation expectations. This will reduce the risk that high inflation persists once its mostly external triggers have faded,” he said. 

After the rate hike announcement, the British pound sank 0.7 percent versus the euro and dollar as dealers fretted over the gloomy outlook.

Shares in London closed just in the black, while Paris was 0.6 percent higher and Frankfurt advanced 0.5 percent. Wall Street stocks dipped slightly in mid-morning trading ahead of key US jobs data.

– Oil tumbles –

Oil prices tumbled with the main US oil contract falling back down to levels not seen since before the war in Ukraine sent crude prices soaring.

West Texas Intermediate dropped below the $90-mark in afternoon trading in Europe.

The fall comes after a decision by the OPEC+ oil cartel, led by Saudi Arabia and Russia, a day earlier to undertake just a small increase in production.

US energy data also revealed unexpectedly weak gasoline demand.

“The oil market is a mixed bag as demand destruction is met with limited spare capacity,” said OANDA’s Moya.

Most Asian indices tracked a Wall Street rally the previous session fuelled by healthy economic and earnings data, despite lingering Taiwan concerns.

New York surged on Wednesday after a report on the crucial US services sector showed surprise improvement, soothing recession fears in the world’s top economy.

Markets have swung this week after a number of Federal Reserve officials lined up to suggest there were still some big US rate hikes likely and talk of cuts next year might be overdone.

– Pelosi visit –

The mood in Asia was also a lot more settled after the upheaval of this week’s visit to Taiwan by US House Speaker Nancy Pelosi, which sparked outrage in China with warnings of stern military and economic responses.

Beijing has suspended a limited amount of cross-strait imports and exports, and on Thursday began its largest-ever military exercises encircling Taiwan that are expected to last for days.

Soon after, Taiwan’s defence ministry said it was “preparing for war without seeking war”.

Taipei stocks fell again on worries that the Chinese manoeuvres would hit shipping lanes and flights into Taiwan.

– Key figures at around 1545 GMT –

New York – Dow: DOWN 0.4 percent at 32,680.46 points

EURO STOXX 50: UP 0.6 percent at 3,754.60

London – FTSE 100: FLAT at 7,448.06 (close)

Frankfurt – DAX: UP 0.5 percent at 13,662.68 (close)

Paris – CAC 40: UP 0.6 percent at 6,513.39 (close) 

Tokyo – Nikkei 225: UP 0.7 percent at 27,932.20 (close)

Hong Kong – Hang Seng Index: UP 2.1 percent at 20,174.04 (close)

Shanghai – Composite: UP 0.8 percent at 3,189.04 (close)

Euro/dollar: UP at $1.0214 from $1.0166 Wednesday

Pound/dollar: DOWN at $1.2132 from $1.2149

Euro/pound: UP at 84.22 pence from 83.63 pence

Dollar/yen: DOWN at 133.35 yen from 133.86 yen

Brent North Sea crude: DOWN 2.8 percent at $94.09 per barrel

West Texas Intermediate: DOWN 2.6 percent at $88.32 per barrel

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Rescuers raced Thursday to free 10 workers trapped in a coal mine after a cave-in in northern Mexico, where desperate relatives spent a sleepless night waiting for news.

Dozens of military personnel, emergency workers and rescue dogs were deployed after flooding caused the collapse Wednesday in Sabinas in the state of Coahuila, President Andres Manuel Lopez Obrador said.

“What I want with all my soul is that we rescue the miners,” he told reporters.

“We must not lose faith. We must not lose hope,” he added.

Five miners managed to escape alive and were taken to hospital, civil defense national coordinator Laura Velazquez said, adding that two had been discharged.

“Time is crucial here,” she said.

“To get to the mines you have to go down three shafts. It’s complicated but we’ve been managing to do it, pumping out water… to rescue the miners as soon as possible,” Velazquez added.

– ‘Not much hope’ –

Anxious relatives gathered to wait for news, with some crying and comforting each other at the site, about 1,130 kilometers (700 miles) north of Mexico City.

“Unfortunately, there’s not much hope,” Jose Luis Amaya, whose cousin and brother-in-law were among those trapped, told Milenio TV on Wednesday night.

The mother of one of the workers wept inconsolably, unable to answer questions from the press.

Through tears, another woman at the scene said two of her children worked in the mine, though one of them had managed to escape after the accident.

As night fell hours later, the families gathered under tents outside the mine in silence as state police, the national guard, medical teams and other rescuers worked to find the trapped workers.

Coahuila’s state government said that the miners had been carrying out excavation work when they hit an adjoining area full of water, causing the shaft to collapse and flood.

“The mine began operating in January of this year and until now there have been no reports of any type of anomaly,” it said in a statement.

State governor Miguel Riquelme said he had asked labor authorities and the local prosecutor’s office to prioritize the rescue and investigation.

Coahuila, the country’s main coal-producing region, has seen a series of fatal mining accidents over the years.

The worst was an explosion that claimed 65 lives at the Pasta de Conchos mine in 2006.

Last year, seven miners died when they were trapped after another accident in Coahuila.

Britain will sink into a lengthy recession later this year as inflation rockets even higher, the Bank of England forecast Thursday as it unveiled the biggest interest rate hike since 1995.

The move comes as Britons endure a cost-of-living crisis that has dominated the race to succeed Boris Johnson following his resignation as prime minister.

The BoE’s Monetary Policy Committee voted 8-1 to lift its key rate by 0.50 percentage points to 1.75 percent, it said in a statement.

Most policymakers felt that a “more forceful policy action was justified” than in previous meetings to combat rampant inflation fuelled by rocketing domestic energy bills.

The BoE is the latest central bank to ramp up its rates as countries around the world battle decades-high consumer prices that have soared since Russia invaded Ukraine in February.

“I have huge sympathy for those who are struggling and are asking why we’re making it even harder,” bank governor Andrew Bailey said at a news conference.

“All I can say is the alternative is worse,” he said.

– ‘Winter is coming’ –

UK inflation was predicted to peak this year at just over 13 percent, reaching the highest level since 1980. The BoE’s chief task is to keep inflation close to a target of 2.0 percent.

The bank said wholesale gas prices have nearly doubled since May due to Russia restricting supplies to Europe, warning that this will “exacerbate” the fall in real incomes and further increase inflation in the near term.

The bank now anticipates the UK economy will enter a painful recession in the fourth quarter that will last until late 2023.

The UK economy is expected to shrink by up to 2.1 percent in size from its highest point, according to the forecast.

“Winter is coming, and it’s shaping up to be an absolute horror show for the UK economy,” said Laith Khalaf, analyst at AJ Bell, an investment platform.

“Make no mistake, 0.5 percent is a historic interest rate rise, but it is overshadowed by the abysmal economic forecasts produced by the Bank of England,” Khalaf said.

UK inflation had already jumped to a four-decade high of 9.4 percent in June.

“Our job is to make sure that this inflation, created by the crisis, isn’t still around in two, three years,” said BoE deputy governor Ben Broadbent.

The BoE rate hike met expectations but the British pound sank 0.7 percent versus the euro and dollar as dealers fretted over the gloomy outlook.

– ‘Challenging winter ahead’ –

The two Conservatives vying to succeed Johnson seized on the BoE announcement to highlight their cost-of-living plans.

Liz Truss, who leads in the polls, has pledged to start cutting taxes from day one with an emergency budget. 

“Today’s (BoE) news underlines the need for the bold economic plan that I am advocating. We need to take immediate action to deal with the cost of living crisis, grow the economy and delivering as much support to people as possible,” she said.

Former finance minister Rishi Sunak tweeted that “one of the most urgent challenges we face as a country is getting inflation under control as quickly as possible.”

“As prime minister I would prioritise gripping inflation, growing the economy and then cutting taxes.”

Added to the picture, UK energy regulator Ofgem is due to ramp up domestic electricity and gas prices again in October, just ahead of the colder northern hemisphere winter.

The BoE said Thursday that the typical UK household energy bill will leap to £3,500 ($4,255) per year as a result.

Separately, Ofgem warned Thursday that Britons face a “very challenging winter ahead”, adding its energy price cap will now be reviewed every quarter instead of every six months.