FTSE soars as central bank sits on hands

Market report Emma Newlands

Sterling took a tumble as the Bank of England kept interest rates on hold and warned that UK economic growth will remain “sluggish”.

The pound sank to a nine-month low against the euro, slipping 0.8 per cent to €1.11, as the Bank’s monetary policy committee voted 6-2 to keep the cost of borrowing at a record low of 0.25 per cent.

The UK currency also suffered versus the US dollar, dropping 0.6 per cent to $1.31, giving up gains seen in morning trading.

In a contrast of fortunes, the FTSE 100 Index pushed higher following the announcement, closing up 63.34 points to 7,474.77 despite the Bank slashing its growth forecasts for the UK economy. The gloomy outlook was compounded by the latest update from Britain’s dominant services sector, which eked out a small rebound last month. Connor Campbell, financial analyst at Spreadex, said sterling “caught a case of the Bank of England blues” with the currency “baulking at the dose of dovishness served up by Mark Carney”.

Struggling aerospace and defence firm Cobham took off on the London market after signalling that its turnaround could be on track. Pretax profits came in at £14.3 million, compared to a £38.4m loss in the same period last year, with shares rising 11.3p to 145.3p.

The biggest risers on the FTSE 100 Index included Randgold Resources, up 240p to 7,235p, Imperial Brands, up 100.5p to 3,305.5p, and British American Tobacco up 150p to 5,004p. The biggest fallers included Convatec Group, down 19.7p to 289.3p, Mondi ,down54p to 1,948p, and Shire, down 82p to 4,118p. The fashion retailer was among the biggest risers, with one analyst saying its trading update provided a “welcome tonic to shareholders”. The insurer fell despite leaping first-half profits, but one analyst highlighted concerns that its flagship brands “are perhaps a little worn out”.