The pound moved higher but stocks in London went into reverse after the Bank of England voted to cut rates in a decision that needed two rounds of votes.
Schroders analyst George Brown commented: ‘Today’s rate cut is no surprise, but the path forward is anything but clear. Jobs, growth and inflation figures all call for different policy prescriptions, as reflected in the unprecedented two rounds of voting needed to reach a majority. Given the uncertainty presented by the conflicting data, the committee is right to stick to its ’gradual and careful’ mantra.
‘Nervousness about the labour market might prompt another cut in November. But this will be difficult to justify unless disinflation is clearly underway. As such, we think there is a decent chance rates will not fall below the current rate of 4% this year.’
The pound was quoted up at $1.3431 just after midday on Thursday in London, surging from $1.3343 at the equities close on Wednesday and from $1.3377 just before the BoE decision.
The FTSE 100 index was down 64.76 points, 0.7%, at 9,099.55. The FTSE 250 was up 13.78 points, 0.1%, at 21,939.66, and the AIM All-Share was down just 0.13 of a point at 764.22. The trio lost ground immediately after the BoE decision.
The Cboe UK 100 was down 0.6% at 912.11, the Cboe UK 250 was up 0.3% at 19,313.53, and the Cboe Small Companies was slightly higher at 17,186.60.
The BoE cut rates by 25 basis points to 4.00% in a decision that required a second vote.
Andrew Bailey, Sarah Breeden, Swati Dhingra and Dave Ramsden had voted to reduce bank rate by 25 basis points, with Megan Greene, Clare Lombardelli, Catherine Mann and Huw Pill preferring to keep rates at 4.25%. Alan Taylor wanted a chunkier 50 basis point cut.
However, ‘in order to secure a majority decision’, the Monetary Policy Committee voted on whether to cut bank rate by 25 basis points or maintain at 4.25%. Taylor joined those voting for a 25 basis point cut, giving a 5-4 majority in their favour.
‘A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate. The restrictiveness of monetary policy has fallen as bank rate has been reduced. The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease. Monetary policy is not on a pre-set path, and the committee will remain responsive to the accumulation of evidence,’ the BoE said.
In European equities on Thursday, the CAC 40 in Paris advanced 1.2%, while the DAX 40 in Frankfurt gained 1.6%.
The FTSE 100 failed to replicate the confident rally seen in European peers. Share price falls for index heavyweights AstraZeneca, Rolls-Royce and Barclays hit the index. The trio were among those to go ex-dividend, meaning new buyers do not qualify for the latest payout. Drugmaker Astra lost 1.5%, jet engine maker Rolls-Royce shed 1.5% and lender Barclays was down 0.5%.
Gains in Paris and Frankfurt, meanwhile, were largely broad-based.
The euro stood higher at $1.1665 midday Thursday, against $1.1639 at the time of the London equities close on Wednesday. Against the yen, the dollar was trading largely flat at JP¥147.32 compared to JP¥147.34.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.6%, the S&P 500 index up 0.9%, and the Nasdaq Composite 0.8% higher.
The yield on the US 10-year Treasury was quoted at 4.24%, widening from 4.22%. The yield on the US 30-year Treasury was quoted at 4.82%, stretching from 4.81%.
Away from the Bank of England, tariffs remained in focus.
‘Today undoubtedly marks the beginning of a more disruptive period for global trade, with Trump’s tariff rates coming into effect. For many this will be the beginning of a new normal, with businesses adjusting to rates around the 10-20% mark,’ said Rostro analyst Joshua Mahony.
‘However, there are others who face up to a harsher new reality, with Switzerland facing the highest rate of any developed country (39%). While the implications for Swiss businesses and the economy could be harsh, the strength seen today for stocks in the region does serve to highlight an optimism that efforts to renegotiate the tariff rate will soon bear fruit.’
Mahony continued: ‘Meanwhile, Trump has taken aim at the semiconductor industry, placing 100% tariffs on imports in a bid to bring manufacturing back into the US...Notably, the tariffs placed on semiconductors do not cover items which already contain chips within them, meaning that the vast majority of chips coming into the US will not be hit by this 100% levy.’
Morgan Advanced Materials was the biggest loser on the FTSE 250 around midday, down 14%.
The Windsor England-based manufacturer of carbon and ceramic materials reported pretax profit of £30.4 million in the six months to June 30, slipping 47% from £57.5 million the year before, as revenue declined 8.7% to £522.6 million from £572.6 million.
While the company left full year revenue guidance unchanged, it now expects adjusted operating profit to be around the bottom of the £115.6 million to £126.3 million consensus range. This is a result of ‘weak’ market conditions, mix effects and foreign exchange headwinds, and would be down 10% at worst from £128.4 million in 2024.
At the other end, Harbour Energy was the index’s biggest winner, rising 14%.
The North Sea-focused oil and gas producer declared a $100 million share buyback and raised its interim dividend, as it raised its guidance for oil production and free cash flow.
In 2024, it added a portfolio of assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya and Algeria from Wintershall Dea. Reflecting that acquisition, production in the first half of 2025 was 488,000 barrels of oil equivalent per day, up from 159,000 daily a year before. Harbour on Thursday narrowed upward its production guidance for the full year to 460,000 to 475,000 boepd from 455,000 to 475,000.
Pretax profit in the six months that ended June 30 was $1.64 billion, up from $392 million a year before, as revenue and other income multiplied to $5.27 billion from $1.92 billion.
Elsewhere, Vanquis Banking shares advanced 12%. The Bradford, England-based lender said its turnaround ‘remains firmly on track and is gaining momentum’.
‘The group delivered two consecutive quarters of profitability in the first half and has grown gross customer interest-earning balances over the last three quarters,’ Chief Executive Officer Ian McLaughlin said.
Pretax profit in the six months to June 30 totalled £6.2 million, swinging from a loss of £46.1 million loss the year before.
In addition, it noted a Supreme Court verdict on motor finance arrangements.
‘The recent Supreme Court judgment provides much-needed clarity, and we acknowledge the [UK Financial Conduct Authority’s] decision to consult on a motor finance compensation scheme. Vanquis did not participate in discretionary commission arrangements. Our position is clearly differentiated from the unfair relationship decision in the Johnson case, supported by stronger disclosures, much lower average commissions and clear customer consent,’ the CEO said.
Brent oil was quoted down at $67.32 a barrel at midday in London on Thursday from $68.31 late Wednesday. Gold was broadly flat at $3,374.87 an ounce against $3,375.48.
Still to come on Thursday’s economic calendar, weekly jobless claims data in the US at 1330 BST.
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