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FTSE 100 Index rises on rate cut hopes

Last updated: 08:15 01 Jul 2016 BST, First published: 06:54 01 Jul 2016 BST

Bank of England Governor Mark Carney

Blue-chip shares rose modestly on Friday on the prospect of a rate cut from the Bank of England, but the pound had a rocky ride.

The FTSE 100 Index gained 15.47 points to 6519.8 after bank governor Mark Carney said a looser monetary policy could be necessary to prevent the UK slipping into recession after the EU vote.

But the FTSE250 slipped back 156 points over concerns about the outlook for the UK economy over the rest of the year. Small-cap indices were slightly higher.

After an initial hit following the Carney comments, sterling was trading 0.03% higher against the dollar at US$1.3315.

Ipek Ozkardeskaya at London Capital Group said: "Inflation should be monitored carefully as the sharp depreciation in the pound following the ‘Leave’ vote could cause certain acceleration in consumer prices."

UK PMI manufacturing figures for June hit their highest since January, but survey compilers Markit and the Chartered Institute of Purchasing & Supply cautioned that the data was collected mainly before the referendum.

Silver miner Fresnillo PLC (LON:FRES) and Randgold Resources PLC (LON:RRS) were on the up as the gold price rose more than 1% to US$1,336.7 an ounce.

Shares in Sky PLC (LON:SKY) rose 2.18% to 866.5p following speculation that founder Rupert Murdoch could buy the 60.1% of the satellite broadcaster he does not already own.

But Royal Bank of Scotland PLC (LON:RBS) was still in the doldrums, falling 1.6% to 168.9p on fears about the potential impact on the banking sector of an EU exit. Lloyds Banking Group (LON:LLOY) also fell 1% to 53.5p.

Among small-caps, Mozambique titanium producer Kenmare Resources (LON:KMR) climbed 32.5% to 1.1p on news issued after the market close on Thursday.

Kenmare said it had raised new equity commitments of US$275mln, which it said would allow its capital restructuring and open offer to go ahead.

Eco Animal Health (LON:EAH) fluffed up 9.9% to 417.5p on news of a 51% rise in annual pre-tax profits to £7.7mln.

But publishing and media group Ten Alps PLC (LON:TAL), trading as Zinc Media, dropped 28.1% to 0.58p as chief executive Mark Wood stepped down.

Shares in Stellar Resources PLC (LON:STG) also lost their shine by 15.1% to 0.14p after a study showed potential gold in the Dolgellau gold belt in Wales.

But it outlined several obstacles to extracting it such as securing permission from landowners and planners, given the target area is in the Snowdonia national park.

Preview at 6.54

There is every chance the FTSE 100 could end the week higher than it started – which would be a quite remarkable feat given Monday’s mass sell-off.

Spread betting firms are predicting the index of British blue-chip shares will open 51 points to the good, pushing it to 6,555.33. That’s a full 200 points higher than it started.

The latest boost to sentiment? Bank of England Governor Mark Carney’s ‘Superman-esque’ swoop to save the markets.

Actually, it was less of a swoop and more of a hint at fresh stimulus to head off an economic downturn in the wake of the Brexit vote.

Immediately the markets took this to mean a potential cut to the base rate, which currently stands at 0.5%, as the pound once again lost support on the currency markets.

“A rate cut probably won’t come in July given the governor’s assertion that the MPC would assess the situation at the July 14 meeting,” said Michael Hewson, analyst at CMC Markets.

“Further measures could well get implemented at the August meeting when the Bank sets out its latest inflation report, along with revised growth forecasts where we are quite likely to see the 2016 forecast lowered sharply from the current 2%.”

Wall Street ended the session in chipper mood with the Dow Jones and broader-based S&P 500 posting gains of 1.3 and 1.4% respectively.

In Asia, investors were upbeat too with Hong Kong’s Hang Seng rising 1.8%, the Shanghai Composite ahead 0.1% and Japan’s Nikkei 225 posting a 0.5% gain.

Back here in the UK, expect a paucity of corporate news after yesterday’s unseemly scramble to get financial filings out before the half-year cut-off.

*Brent crude for delivery next month was 32 cents higher and back over the US$50-mark at US$50.03.

*Gold – the value of an ounce of the yellow metal rose US$12.10 to US$1,332.70.

*Pound – after an initial hit following the Carney comments, sterling was trading 0.03% higher against the dollar at US$1.3315.

*Rumour: Kraft’s confectionery arm Mondelez is seeking to buy US rival Hershey.

City Pages

*Britain’s vote to leave the EU makes it “more necessary than ever” for EDF to delay making a final investment decision on the Hinkley Point nuclear power plant in the UK, said three powerful trade unions representing thousands of workers at the company – FT.

*Nigeria says it has signed provisional agreements worth $80bn with Chinese companies to upgrade its oil and gas infrastructure, in a sign of Beijing’s willingness to bolster Africa’s largest economy as it grapples with its worst economic crisis in decades – FT.

*Executives and directors of Lloyds Banking Group have bought more than a million shares in the taxpayer-backed lender this week after the stock lost more than a fifth of its value after the Brexit vote – Times.

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