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UK shares rally in anticipation of rate cut
Shares rebounded to rise nearly 3 per cent yesterday as expectations soared that the Bank of England would begin its long-heralded programme of rate cuts today. The surge in expectations of the first interest rate cut since August 2005 followed a surprisingly weak survey of the service sector. Bets that the Bank would take action today at the conclusion of the two-day meeting of the Monetary Policy Committee (MPC) sent the pound tumbling on the foreign-exchange markets, hitting its lowest level against the euro in four years. The FTSE 100 index rose by 2.8 per cent to 6,493.80 points, with oil and energy stocks and banking shares among the leaders. Royal Bank of Scotland was among the top percentage gainers, rising by more than 6 per cent in its largest rise in a month, while HSBC and Barclays each rose 3 per cent. Banking shares benefited from a growing expectation that the Bank would cut rates today. Most economists had expected rates to stay on hold this month but a rash of gloomy figures has prompted many banks, including Barclays, Merrill Lynch and RBC, to change their call. Yesterday’s CIPS/RBS purchasing managers’ index of the service sector, perhaps the most closely watched survey of economic output, showed that the financial sector suffered an outright fall in activity in November for a second successive month, as the service sector in general grew at its weakest rate since May 2003. No one has commented on this article. |
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