FTSE rallies after Bank of England cuts interest rates

Britain’s top share index rallied after the Bank of England (BoE) cut interest rates on Thursday, although pharmaceuticals company Hikma and precious metals mining group Randgold Resources slumped after poor updates.

The blue-chip FTSE 100 index rose 1.4 per cent to 6,729.24 points by midday having set a new three-week low of 6,615.83 early in the session.

The Iseq was up 0.61 per cent.

The BoE lowered its main lending rate to a record-low 0.25 per cent from 0.5 per cent, in line with market expectations and the first cut since 2009, as Britain’s economy teeters on the brink of recession after June’s Brexit vote.

Uncertainty

“Post-referendum, the UK faces a lengthy period of uncertainty. In the shorter term this will result in lower investment and consumption . . . In this context, the MPC’s decision to cut interest rates is a step in the right direction,” Thomas Miller Investment’s chief investment officer, Abi Oladimeji, said in a note.

The FTSE 250 mid-cap index, which is dominated by domestically focused companies, extended gains to trade 1.3 per cent higher.

Banking sector stocks Lloyds and Royal Bank of Scotland pared gains after the BoE decision and mid-cap challenger bank CYBG fell 2.6 per cent.

Housebuilders

UK housebuilders, however, reversed their losses after the rate cut, with the UK Real Estate index trading 1.2 per cent higher.

Some companies also gained on the back of strong results.

Aviva was up 6.5 per cent after the insurer boosted profits and cash generation in the first half of the year despite a challenging market backdrop, enabling it to raise its interim dividend.

Mid-cap outsourcing firm Serco Group surged more than 14 per cent after raising its 2016 profit forecast for the second time this year and said Britain's vote to leave the European Union could bring opportunities as well as costs.

Some companies suffered heavily after their updates.

Hikma dropped 12.3 per cent and headed for its worst one-day percentage drop in seven years after saying that its full-year core operating profit from its generics unit would be hurt by delayed approvals of new products and higher-than-expected costs.

Randgold Resources, down 8.2 per cent, also featured among the top decliners after it said its second-quarter profit from mining was flat as higher gold prices were offset by lower production and increased costs. – (Reuters)