BoJ and BoE keep rates unchanged as central banks strike cautious tone on inflation

The Bank of England and the Bank of Japan kept their interest rates unchanged yesterday, capping off a year of easing with a cautious stance for 2025. Despite the US Federal Reserve and the European Central Bank’s (ECB) recent rate cuts, central bankers are signalling that inflation continues to prove stickier than expected, pointing to potentially slower easing cycles next year, and triggering sell-offs across stock markets.

THE BANK OF ENGLAND-

The Bank of England (BoE) kept its interest rate unchanged at 4.75% as it looks to “squeeze” remaining inflationary pressures and reach the 2% target, according to a BoE statement. Inflation in the UK hit an eight-month high in November, according to AP. “With the heightened uncertainty in the economy, we can’t commit to when or by how much we will cut rates in the coming year,” Reuters quotes BoE governor Andrew Bailey as saying, striking a cautious tone. The BoE decision was followed by a 1.1% drop in the FTSE 100 index.

BANK OF JAPAN-

Japan also wants to weigh upcoming risks: The Bank of Japan (BOJ) kept interest rates steady at 0.25% as it bides its time on risks overseas and the wage outlook next year, according to statements from BoJ governor Kazuo Ueda picked up by Reuters. “Underlying inflation is heightening but at a moderate pace. That is allowing us to go slow in raising rates,” Ueda said.

PEOPLE’S BANK OF CHINA-

The People’s Bank of China (PBOC) kept its main benchmark lending rates unchanged this morning, in line with economists’ expectations, CNBC reports. China’s leadership indicated a shift towards more aggressive economic support in 2025, which is expected to include interest rate cuts and a widening of the 3% fiscal deficit.

MORE FALLOUT FROM FED’S CUT-

US stocks ended the day flat despite an earlier bounce from a widespread sell-off earlier on Wednesday, with the Nasdaq and the S&P 500 both down a marginal 0.1%.

The yield on US 10-year Treasuries also hit its highest level since May at 4.59%, jumping 0.2 percentage points in the past two days, the Financial Times reports.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.6% on Thursday on turnover of SAR 10.9 bn. The index is down 0.6% YTD.

In the green: Savola Group (+10.0%), MESC (+5.1%) and Cenomi Centers (+3.9%).

In the red: Fitaihi Group (-6.7%), AlArabia (-4.2%) and Ayyan (-3.9%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.8% on Thursday on turnover of SAR 54.2 mn. The index is up 28.2% YTD.

In the green: Leaf (+13.3%), IOUD (+8.9%) and Tadweer (+6.7%).

In the red: AlJouf Water (-12.7%), View (-7.9%) and Aqaseem (-7.6%)

CORPORATE ACTIONS-

#1- Our friends at United Electronics (eXtra) will distribute SAR 400 mn in dividends at SAR 5 apiece for 4Q 2024, according to a disclosure to Tadawul. Eligible shareholders will be able to cash-in starting Tuesday, 31 December.

ALSO- eXtra’s board recommended a buyback of up to 3 mn ordinary shares to be held as treasury, in a bid to prop up its stock price which it currently deems undervalued, it said in a separate statement to the exchange. The company will tap its own resources and its subsidiary United Holding International’s IPO proceeds to fund the purchase.

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#2- Savola wraps capital cut, offloads Almarai stake: Savola Group deposited 0.3044 Almarai shares for every Savola share held by eligible shareholders into their portfolios, it said in a statement to Tadawul. This marks the last step of a 73.5% capital reduction which saw the food giant cancel some 834 mn shares and distribute its entire stake in its dairy unit Almarai.

The reduction is intended to optimize Savola’s capital structure, as the capital is deemed excessive for current needs. Riyad Capital is financial advisor on the transaction.

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#3- The Capital Market Authority (CMA) announced it has approved Saudi Fisheries Company’s request to reduce its capital to SAR 67 mn — down from SAR 400 mn. The number of shares will be decreased 6.7 mn shares, down from 40 mn. This is a bigger reduction than the originally requested SAR 264 mn in June as the company works to offset incurred losses.

#4- Tadweeer announced a 100% capital increase, funded by capitalizing SAR 58.1 mn from retained earnings, according to a Tadawul filing. This move will double the number of shares to 116.2 mn, granting shareholders one bonus share for every share they own.

#5- Makkah Construction and Development received CMA approval to increase its capital to SAR 2 bn, up from 1.6 bn by distributing bonus shares to existing shareholders. SAR 351.8 mn from the statutory reserve account will finance the move and the new number of shares will stand at 200 mn.