London close: Markets close higher as BoE slashes interest rates
London’s benchmark was back into the green by the close on Thursday, after the Bank of England cut interest rates to 0.1% - the lowest level in history - from 0.25%, as it looked to limit the economic fallout from the coronavirus pandemic.
The FTSE 100 ended the session up 1.4% at 5,151.61, while the FTSE 250 fell 1.37% to 12,829.70.
Sterling, meanwhile, managed to claw back some of Wednesday’s losses against its major trading pairs, rising 0.25% on the dollar to $1.1649, and surging 2.6% against the euro to €1.0920.
“Over recent days, and in common with a number of other advanced economy bond markets, conditions in the UK gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves,” the Bank of England said in its statement.
“As a consequence, UK and global financial conditions have tightened.”
At a special meeting on Thursday, the Monetary Policy Committee voted unanimously to cut rates and to increase holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200bn to £645bn.
It also agreed to enlarge the term-funding scheme for small and medium-sized enterprises.
It was the Bank's second emergency cut in March, having slashed the base rate to 0.25% from 0.75% due to the coronavirus on 11 March.
“The move triggered a little bit of activity in the pound, which has come under considerable pressure over the last week or so, before settling around the pre-announcement levels,” said Oanda analyst Craig Erlam.
“The biggest impact has come in government bonds, where the BoE stated it will focus much of the new asset purchases, with the program increased by almost 50%.
“This should alleviate some of the pressure that's built in the aftermath of the UK governments huge stimulus plans which will flood the market with new debt.”
Earlier, initial enthusiasm about the European Central Bank’s €750bn emergency bond buyback to mitigate the impact of the pandemic was dying down.
“I'm not sure these stimulus efforts are enough yet to help the market fully bounce, but we are looking for signs of stabilisation with smaller daily moves in the main indices, and for certain sectors to start to respond better,” said Neil Wilson, chief market analyst at Markets.com, on the ECB’s moves.
On the corporate front, there was - unsurprisingly - another string of updates on the impact of Covid-19.
Burberry rebounded 3.22% by the close, after the luxury retailer said trading has deteriorated significantly over the last couple of months due to the outbreak and that sales in the fourth quarter will decline around 30%.
As a result of government restrictions on travel and social contact, the group now expects comparable retail store sales in the final weeks of the year to be down between 70% and 80%.
Online retailer Ocado was 3.01% weaker even as it reported a rise in first-quarter revenue and a massive increase in current orders as people stockpile food due to the coronavirus crisis.
Fashion retailer Next managed gains of 5.2%, after saying it could survive a £1bn sales decline representing 25% of annual turnover by conserving cash and without taking government help apart from the business rates holiday.
Reporting annual results, Next said it was impossible to publish guidance for the current year because there was no way of predicting how bad the virus's impact would be on sales.
Elsewhere, Elementis rocketed 123.7% after announcing the relaxation of its banking covenants as it suspended its final dividend to conserve cash in response to threats to demand from the coronavirus.
Market Movers
FTSE 100 (UKX) 5,151.61 1.40%
FTSE 250 (MCX) 12,829.70 -1.37%
techMARK (TASX) 2,983.10 2.08%
FTSE 100 - Risers
M&G (MNG) 124.50p 34.44%
Carnival (CCL) 737.20p 18.90%
TUI AG Reg Shs (DI) (TUI) 338.10p 18.80%
Auto Trader Group (AUTO) 432.30p 15.85%
Ashtead Group (AHT) 1,450.00p 11.54%
Flutter Entertainment (FLTR) 6,136.00p 11.32%
Centrica (CNA) 43.39p 10.97%
Diageo (DGE) 2,400.50p 9.11%
JD Sports Fashion (JD.) 319.40p 8.94%
ITV (ITV) 64.02p 8.66%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 195.00p -9.05%
Glencore (GLEN) 117.00p -9.00%
Evraz (EVR) 209.80p -8.98%
InterContinental Hotels Group (IHG) 2,385.50p -8.44%
SEGRO (SGRO) 659.40p -7.80%
Barratt Developments (BDEV) 367.80p -7.58%
Aviva (AV.) 217.40p -7.01%
Melrose Industries (MRO) 107.25p -6.74%
United Utilities Group (UU.) 875.80p -6.43%
Meggitt (MGGT) 223.20p -6.38%
FTSE 250 - Risers
Elementis (ELM) 40.96p 123.70%
FirstGroup (FGP) 38.00p 34.37%
SSP Group (SSPG) 195.00p 29.31%
Hiscox Limited (DI) (HSX) 995.00p 26.59%
Greencore Group (GNC) 133.30p 23.88%
Energean Oil & Gas (ENOG) 359.50p 20.60%
Intermediate Capital Group (ICP) 673.00p 20.29%
Pets at Home Group (PETS) 234.00p 18.24%
IWG (IWG) 134.55p 18.03%
Avast (AVST) 321.20p 17.52%
FTSE 250 - Fallers
Crest Nicholson Holdings (CRST) 182.30p -29.29%
4Imprint Group (FOUR) 1,350.00p -20.72%
TBC Bank Group (TBCG) 725.00p -20.59%
Morgan Sindall Group (MGNS) 1,092.00p -18.71%
Marston's (MARS) 26.10p -17.58%
Ninety One (N91) 133.00p -16.88%
Rank Group (RNK) 85.00p -16.17%
Virgin Money UK (VMUK) 58.72p -16.05%
NewRiver REIT (NRR) 71.00p -15.27%
Mediclinic International (MDC) 251.20p -14.12%