London midday: FTSE maintains gains, sterling slumps further as BoE cuts rates

(Sharecast News) - London stocks were still firmly in the black by midday on Thursday after the Bank of England cut interest rates by 25 basis points, as expected.

The FTSE 100 was 1.1% higher at 8,717.28, topping the 8,700 mark for the first time, while sterling extended losses against the dollar, down 1% at 1.2378.

The Monetary Policy Committee voted to cut the cost of borrowing to 4.5% by a majority of 7 to 2. The two members who voted against the 25 basis point cut argued instead for a bigger 50bps reduction.

The MPC last reduced rates in November.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The Bank's decision has added to the feel-good factor for the Footsie, with investors reassured that policymakers stuck to the expect script and cut interest rates with more expected this year. The index surged to fresh record highs, as the falling pound buoyed multinationals with overseas earnings.

"A sigh of relief is greeting this rate cut given how long painful borrowing costs have lingered, 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 piling up, but the economy is stagnating, and business confidence has taken a knock.

"The vote was resoundingly for a cut, with two members wanting to go even further pushing for a 0.5% reduction. This has increased expectations that further rate cuts will come more quickly this year with markets now pricing in the likelihood that the base rate will be close to 3.75% by December, indicating three further reductions. That's been reflected in the movement of the sterling, which has continued to fall back against the dollar.

"The Bank has slashed its forecast for growth this year, which keeps the door wide open for multiple rate cuts to come. Other data out this week shows that job cuts are landed at the steepest pace in four years in the services sector and the activity in the construction sector contracted unexpectedly in January for the first time in a year."

Earlier, a survey showed the UK construction sector slumped in January as concerns about the economy weighed heavily.

The latest S&P Global UK construction PMI came in far below analyst expectations, tumbling to 48.1 in January from 53.3 a month previously. It is the first time that the index has fallen below 50.0 since February 2024.

A reading above the neutral 50.0 benchmark indicates growth, while one below it suggests contraction.

Analysts had been expecting a reading of 53.4.

Within that, the housebuilding index declined for the fourth successive month, to 44.9, while civil engineering came in at 44.6, although that was partly attributed to the wet weather at the start of the year.

Output in the commercial construction sector, meanwhile, returned to contraction, falling to 48.9.

Respondents blamed delayed decisions on major projects by clients as well as wider economic uncertainty.

Input inflation, meanwhile, accelerated to a 21-month high, as energy, transport and staff costs all rose.

Tim Moore, economics director at S&P Global Market Intelligence, said: "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.

"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."

In equity markets, Anglo American gained after a fourth-quarter production report, while AstraZeneca was up as the pharma giant posted a jump in full-year profits.

BBGI Global Infrastructure surged after agreeing to be bought by Canadian pension fund manager British Columbia Investment Management in a �1.06bn deal.

Defence contractor Babcock surged as it upgraded full-year expectations on the back of double-digit organic growth in its nuclear operations and strong growth in the marine division.

Greencore was sharply higher after Deutsche Bank upgraded shares of the food producer to 'buy' from 'hold' and lifted the price target to 225p from 195p.

On the downside, engineering company IMI fell after saying it had been hit by a cyber attack on its computer systems.

Catering giant Compass lost ground as it reported a 9.2% increase in organic revenues in the first quarter but warned that, if current foreign exchange rates persist for the remainder of the year, they would have a $558m negative impact on revenues, compared with a hit of just $69m last year.

Weir Group was knocked lower by a downgrade to 'neutral' by BNP Paribas Exane, while Halma was weaker after a downgrade to 'reduce' by HSBC.

Market Movers

FTSE 100 (UKX) 8,717.28 1.09%

FTSE 250 (MCX) 21,022.17 1.25%

techMARK (TASX) 4,753.20 0.85%

FTSE 100 - Risers

Anglo American (AAL) 2,478.50p 6.28%

Antofagasta (ANTO) 1,774.00p 4.66%

AstraZeneca (AZN) 11,624.00p 4.48%

Prudential (PRU) 677.80p 3.48%

easyJet (EZJ) 521.60p 3.29%

Glencore (GLEN) 359.45p 3.23%

CRH (CDI) (CRH) 8,174.00p 2.87%

Beazley (BEZ) 860.50p 2.87%

Schroders (SDR) 373.20p 2.87%

Rio Tinto (RIO) 5,025.00p 2.55%

FTSE 100 - Fallers

IMI (IMI) 1,911.00p -2.65%

Weir Group (WEIR) 2,306.00p -2.21%

Halma (HLMA) 2,886.00p -1.84%

Experian (EXPN) 3,919.00p -1.78%

Compass Group (CPG) 2,756.00p -1.22%

London Stock Exchange Group (LSEG) 11,970.00p -1.03%

Pearson (PSON) 1,340.00p -0.89%

BAE Systems (BA.) 1,199.50p -0.70%

Rolls-Royce Holdings (RR.) 598.40p -0.56%

Rightmove (RMV) 671.40p -0.53%

FTSE 250 - Risers

Ferrexpo (FXPO) 86.20p 17.12%

BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 142.00p 16.58%

Wizz Air Holdings (WIZZ) 1,394.00p 9.68%

Babcock International Group (BAB) 594.00p 9.49%

International Public Partnerships Ltd. (INPP) 122.00p 6.64%

HICL Infrastructure (HICL) 118.60p 5.52%

Ocado Group (OCDO) 325.20p 4.57%

TBC Bank Group (TBCG) 3,490.00p 3.25%

NextEnergy Solar Fund Limited Red (NESF) 68.10p 3.18%

Wood Group (John) (WG.) 70.40p 3.15%

FTSE 250 - Fallers

Indivior (INDV) 855.50p -2.28%

Paragon Banking Group (PAG) 767.00p -1.79%

QinetiQ Group (QQ.) 359.60p -1.37%

Deliveroo Class (ROO) 136.20p -1.02%

Bluefield Solar Income Fund Limited (BSIF) 80.80p -0.98%

Chemring Group (CHG) 309.50p -0.96%

Aberforth Smaller Companies Trust (ASL) 1,416.00p -0.84%

Watches of Switzerland Group (WOSG) 550.50p -0.81%

Harworth Group (HWG) 168.50p -0.59%

W.A.G Payment Solutions (WPS) 72.20p -0.55%