Josh White Sharecast News

06 Feb, 2025 17:32 06 Feb, 2025 16:45

London close: FTSE hits fresh record as Bank of England cuts rates

dl city of london square mile financial district generic 16 — Sharecast / Mike Clegg via Pexels

Anglo American

2,255.00p

17:15 21/03/25

-3.07%

-71.50p

London's financial markets closed well above the waterline on Thursday, following the Bank of England's decision to reduce its main interest rate by 25 basis points to 4.5%, as expected.

BBGI Global Infrastructure S.A. NPV (DI)

139.00p

17:15 21/03/25

0.00%

0.00p

Electronic & Electrical Equipment

9,833.52

16:39 21/03/25

-1.25%

-124.15

Wizz Air Holdings

1,650.00p

17:10 21/03/25

-2.83%

-48.00p

The FTSE 100 index climbed 1.21% to close at 8,727.28 points, reaching a new record high, while the FTSE 250 saw gains of 1.01% to end the day at 20,973.13 points.

In currency markets, sterling was last down 0.54% on the dollar, trading at $1.2438, as it fell 0.27% against the euro, changing hands at €1.1988.

“The difference between the FTSE 100 and the UK economy has been starkly laid bare today,” quipped IG chief market analyst Chris Beauchamp.

“While the index has surged to new record highs thanks to solid earnings today and yesterday from index heavyweights AstraZeneca and GSK, the outlook for UK plc continues to be grim.

“Sterling’s weakness has undoubtedly boosted the index’s attractiveness for global investors, who continue to relish the opportunity to go bargain-hunting in UK names.”

Beauchamp said any relief among individual Britons regarding lower rates was likely to be tempered by the warnings about weaker growth and higher inflation.

“US stocks have run into some turbulence after their rebound from Monday’s lows, weighed down by some gloomier earnings and the impending payrolls report.

“Investors have been able to put tariff worries aside after Monday’s rout, but they are sure to rear their head again, and the damage to stocks next time might be more long-lasting.”

Bank of England makes widely-anticipated rate cut

Interest rates were at the top of the agenda on Thursday, after the Bank of England reduced interest rates by 25 basis points, lowering the benchmark rate to 4.5% as expected.

The decision, backed by seven of the nine Monetary Policy Committee members, came amid concerns over weakening economic growth.

Swati Dhingra and Catherine Mann, the two dissenting members, had advocated for a larger 50-basis-point cut.

The central bank acknowledged easing domestic inflation pressures but warned that rising global energy costs could push consumer price inflation to 3.7% by the third quarter.

Inflation remained above the Bank’s 2% target, while economic growth has faltered.

GDP was estimated to have contracted by 0.1% in the final quarter of 2024, and the Bank now projected just 0.75% growth for 2025, down from an earlier forecast of 1.5%.

The MPC signalled that further cuts were likely, with markets anticipating two to three more reductions this year.

“A sigh of relief is greeting this rate cut, given how long painful borrowing costs have lingered,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“But the move and the outlook from the bank underlines the challenges facing the UK.

“The risks of stagflation are stark. Inflation remains above the Bank’s 2% target, and price pressures are piling up. But the economy is stagnating and business confidence has taken a knock.”

UK construction sector contracts, US jobless claims rise faster than expected

On the data front, the UK construction sector entered contraction in January as economic uncertainty weighed on activity.

The S&P Global UK Construction purchasing managers' index (PMI) fell to 48.1 from December’s 53.3, well below expectations and marking the first sub-50 reading since early 2024.

Housebuilding activity declined for the fourth consecutive month, registering 44.9, while civil engineering fell to 44.6, partly due to adverse weather.

Commercial construction, which had been expanding, slipped into contraction at 48.9, as businesses delayed major projects.

Input costs surged to a 21-month high, driven by rising energy, transport, and labor expenses.

“UK construction output fell for the first time in nearly a year, as gloomy economic prospects, elevated borrowing costs and a weak client confidence resulted in subdued workloads,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Construction firms noted the fastest fall in residential work for 12 months, as market conditions remained somewhat subdued.

“Anecdotal evidence suggested that caution regarding demand for new projects was prevalent at the start of 2025, despite strong policy support for house building and hopes for a longer-term boost to supply via planning reform.”

Across the Atlantic, jobless claims in the United States rose at a faster pace than forecast in the week ended 1 February.

Initial claims increased by 11,000 to 219,000, exceeding market expectations of 213,000, while continuing claims climbed by 26,000 to 1.88 million.

The four-week moving average, which smooths out volatility, rose to 216,750 as layoffs picked up in states like New York and California.

BBGI rockets on acquisition agreement, Compass Group in the red

On London’s equity markets, Anglo American climbed 5.66% following a positive fourth-quarter production report, while AstraZeneca surged 6.6% as the pharmaceutical giant reported a strong rise in full-year profits.

BBGI Global Infrastructure rocketed 17.85% after agreeing to a £1.06bn takeover by Canadian pension fund manager British Columbia Investment Management.

Babcock International advanced 5.9% as the defence contractor lifted full-year expectations, citing double-digit organic growth in its nuclear operations and a strong performance in its marine division.

Food producer Greencore Group rallied 13.66% after Deutsche Bank upgraded the stock to ‘buy’ from ‘hold’ and raised its price target from 195p to 225p.

Wizz Air Holdings soared 14.08%, driven by short covering, a weaker oil price, and a softer dollar.

Ferrexpo rebounded sharply, gaining 22.55% after plunging earlier in the week when news emerged of a £3bn civil claim against its Ukrainian unit.

Luxury watch retailer Watches of Switzerland added 1.62% after reaffirming its full-year guidance, supported by solid holiday sales in the UK and US.

On the downside, IMI fell 1.43% after the engineering firm reported a cyberattack on its systems.

Caterer Compass Group lost 2.01% despite reporting a 9.2% rise in first-quarter organic revenue.

The company warned of a potential $558m foreign exchange-related revenue hit if current currency trends persist.

Weir Group ended the session flat following a downgrade to ‘neutral’ by BNP Paribas Exane, while Halma slipped 1.7% after HSBC cut its rating to ‘reduce.’

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,727.28 1.21%
FTSE 250 (MCX) 20,973.13 1.01%
techMARK (TASX) 4,746.56 0.71%

FTSE 100 - Risers

AstraZeneca (AZN) 11,786.00p 5.93%
CRH (CDI) (CRH) 8,368.00p 5.31%
Antofagasta (ANTO) 1,783.50p 5.22%
Anglo American (AAL) 2,459.00p 5.06%
easyJet (EZJ) 529.20p 4.79%
Barclays (BARC) 307.50p 4.13%
Beazley (BEZ) 866.50p 3.59%
Prudential (PRU) 677.40p 3.42%
Standard Chartered (STAN) 1,107.50p 3.35%
International Consolidated Airlines Group SA (CDI) (IAG) 363.40p 3.33%