FTSE 100: London stocks jump and pound slides after Bank of England cuts interest rates
London stocks jumped this afternoon and the pound hit a one month low after the Bank of England moved to scale back interest rates from a 16-year high at its latest monetary policy meeting.
The FTSE 100 is trading up around 0.24 per cent today, having gained around 0.04 per cent since the Bank’s monetary policy committee voted narrowly in favour of bringing rates down by 0.25 per cent to five per cent.
The FTSE 250, which tends to be more exposed to movements in the domestic economy, spiked 0.85 per cent in the 30 minutes after the Bank’s decision but has since settled to trade up around 0.37 per cent since markets opened this morning.
Traders have begun stepping up their anticipation of a further rate cut in November despite the Bank’s governor Andrew Bailey urging caution today on any further moves.
City investors cheered the decision today but similarly warned borrowers to not “hold out much hope for another rate cut at the next meeting.”
“While this isn’t ‘one and done’ from the Bank of England, there does seem to be a relatively high bar to another cut this year,” said Chris Beauchamp, chief market analyst at online trading platform, IG.
Analysts at Capital Economics said they “suspect the Bank will keep rates on hold in September before proceeding with the next 25 basis point cut in November.”
The pound fell to its lowest in a month, and was last down 0.7 per cent against the U.S. dollar. A fall in interest rates makes the pound less attractive to investors due to the lower returns on offer.
Rate-sensitive sectors like homebuilders and real estate investment trusts
jumped over one per cent and 1.5 per cent, respectively, following the decision.
After a raft of corporate results this mornings, London’s flagship index was dragged higher by strong numbers for Shell and Rolls Royce.
Shell added 1.7 per cent after it reported a profit of $6.3 billion, beating analysts’ forecasts.