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Why Is the United Kingdom’s Stock Market Buoyant?

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BoE decides to keep rates at 0.50%

The iShares MSCI United Kingdom (EWU) rose 1.1% on Thursday, October 8. On Thursday, 82 stocks rose out of EWU’s 109 constituent stocks. The London Stock Exchange was enthusiastic after the BoE’s (Bank of England) rate-setting committee voted for the low-interest rates to continue through October 2015. Currently, the interest rates in the United Kingdom are 0.50%.

The continuing threat of deflation, global market turmoil, and some disappointing economic data led the BoE’s monetary policy committee to keep the rates the same. The low-interest rates boosted the United Kingdom’s equity markets.

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Optimism in the European countries and emerging markets

The FOMC’s (Federal Open Market Committee) minutes led the stock markets upwards across the globe. The above graph shows the rise in the country ETFs as of October 8.

The European countries including the United Kingdom, Germany, France, and Italy are represented by the EWU, the iShares MSCI Germany ETF (EWG), the iShares MSCI France ETF (EWQ), and the iShares MSCI Italy Capped ETF (EWI), respectively. They rose by 0.9%, 0.8%, and 0.9%, respectively, on October 8.

Similarly, the emerging market countries, Russia and China are represented by the Direxion Daily Russia Bull 3X ETF (RUSL) and the Direxion Daily FTSE China Bull 3X ETF (YINN). They rose by 11.3%, and 1.6%, respectively, on Thursday, October 8.

Mining and energy sector is still the favorite

The mining stocks—namely, BHP Billiton (BHP), Rio Tinto (RIO), Fresnillo (FRES), Randgold Resources (RRS), Antofagasta (ANTO), and Anglo American (AAL)—continued their upward trail on October 8. The mining sector got huge attention after the investment research company, Morgan Stanley (MS), upgraded the mining sector to “overweight.”

The energy stocks rallied on October 8 with the rise in the oil prices. These stocks included BP (BP) and Royal Dutch Shell (RDS.A) (RDS.B). The stocks yielded 0.50%, 1.1%, and 0.91%, respectively, on the day.

Next, we’ll look at EWU’s key stocks.

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