8th May 2025 17:01
(Alliance News) - Stocks in London ended mixed as investors weighed a "hawkish" rate reduction by the Bank of England and a trade deal with the US.
The FTSE 100 index ended down 27.72 points, 0.3%, at 8,531.61. It had earlier traded as high as 8,607.71.
The FTSE 250 rose 120.15 points, 0.61%, at 20,457.15, while the AIM All-Share rose 7.16 points, 1.0%, at 720.42.
The Cboe UK 100 ended down 0.2% at 850.80 on Thursday, the Cboe UK 250 was up 0.3% at 17,898.41, and the Cboe Small Companies fell 0.1% at 15,658.54.
In European equities on Thursday, the CAC 40 in Paris closed up 0.9% and the DAX 40 in Frankfurt ended 1.0% higher.
In New York, the Dow Jones Industrial Average and the S&P 500 rose 1.0%, and the Nasdaq Composite was 1.3% higher.
Markets took their lead from the latest UK interest rate decision while a trade deal with the US was also announced as the trading session ended.
The Bank of England lowered interest rates, as expected, although the vote make-up was more hawkish than predicted.
The BoE's Monetary Policy Committee voted 5-4 for the widely expected quarter point cut which takes bank rate to 4.25% from 4.50%.
The vote split was more divided than expected. Two members, Swati Dhingra and Alan Taylor, pressed the case for a larger 50 basis points cut, but two members, Catherine Mann and Huw Pill, preferred to keep rates unchanged.
Most economists had expected all MPC members to support a reduction in rates.
Sanjay Raja at Deutsche Bank said: "For all the hype, the MPC basically took a step back to where they were a month or two ago. This is a more divided MPC. While the direction of policy is still down, the MPC continues to drag its feet on both the speed and scale."
He added: "A 'careful' calibration of monetary policy is still very much a large part of the MPC's parlance. And that doesn't seem to be changing. The probability of sequential back-to-back rate cuts should drop on the back of this.
"And the path of least resistance should be quarterly rate cuts until we see more progress/clarity on the labour market and inflation. We think this could happen in Q4-25 when we get a sense of where 2026 pay settlements are going."
ING said it was a "hawkish" cut as the Bank of England has lowered rates by a quarter point, but failed to endorse market expectations of faster rate cuts.
"Our base case is that the bank keeps cutting rates once per quarter, though we wouldn't rule out a quicker pace of cuts if we're right that services inflation falls faster than the BoE currently expects," the broker said.
The interest rate cut was followed later Thursday by news of a partial trade between the UK and the US.
Speaking as the London market closed, Prime Minister Keir Starmer said the deal showed the UK is "open for business".
Under the deal the US has removed tariffs on UK steel and aluminium, and immediately cut the rate on most UK cars exported to the US from 27.5% to 10%.
The prime minister claimed the deal would also provide "unprecedented access for British farmers" to US markets without compromising Britain's "high standards" on animal welfare and food standards.
The 10% base-level tariff remains for now.
US President Donald Trump praised Starmer following the announcement.
"We have a great relationship. I want to just say that the representatives of UK have been so professional, and it's been an honour doing business with all of them, and in particular the prime minister," he said.
The pound was quoted lower at USD1.3295 late on Thursday afternoon in London, compared to USD1.3342 at the equities close on Wednesday. The euro stood lower at USD1.1265, against USD1.1344. Against the yen, the dollar was trading higher at JPY145.15 compared to JPY143.39.
On the FTSE 100, IMI gained 5.1% after retaining its forecast for revenue growth in 2025, despite posting a modest decline in revenue during the first quarter.
The Birmingham, England-based engineering firm said organic revenue in its first quarter that ended March 31 was 3% lower than the year before, while adjusted revenue was down 5%.
Weir Group advanced 4.1% as UBS upgraded to 'buy' from 'neutral'.
The broker said its 'buy' thesis is mostly driven by its view that there is significant upside to the savings that Weir can achieve from its Performance Excellence plan.
UBS estimates that Weir can generate GBP125 million of savings from the Performance Excellence programme versus guidance of GBP80 million by the end of 2026.
It also thinks Weir is the best protected amongst peers in the event of a downturn following recent tariffs.
An encouraging trading update supported InterContinental Hotels Group, up 1.9%.
Revenue per available room, a key metric in the hotel sector, increased 3.3% on-year in the first quarter, picking up speed from growth of 2.6% in the same period a year ago.
The Holiday Inn owner said its RevPAR rose 3.5% in the Americas, 5.0% in the Europe, Middle East, Asia & Africa region, but fell 3.5% in Greater China.
Chief Executive Officer Elie Maalouf said: "Looking ahead, while noting that some forward economic indicators have softened, our comparable on-the-books global revenue for Q2 continues to show growth on the same position a year ago."
Missing out on Thursday's gains was British Gas owner Centrica, down 7.6%.
It backed annual profit guidance but said the warm weather had hit British Gas, while its Energy unit faced "challenging" markets.
The Berkshire, England-based energy and services company said British Gas Residential Energy has been impacted by warmer than normal weather in the second quarter but is still expected to be within its medium-term sustainable adjusted operating profit range in 2025.
In addition, adjusted operating profit at Centrica Energy is expected to be towards the bottom of its range for the year, with profitability heavily weighted to the second half, the firm added.
This is primarily due to more "challenging" market conditions in the gas & power trading segment, Centrica noted.
On the FTSE 250, Renishaw leapt 19% after the firm avoided a feared profit downgrade after a better-than-expected third quarter.
Renishaw said pretax profit rose 20% to GBP28.1 million in the three months to March 31, its financial third quarter, from GBP23.5 million in the prior three months. Adjusted pretax profit increased 28% to GBP30.0 million from GBP23.5 million in the previous three months.
Revenue increased 4.8% to GBP180.7 million in the three months to March 31 from GBP172.4 million a year prior, and by 7.9% from GBP167.5 million in the previous three months, with "solid" order intake during the three-month period.
Peel Hunt said three-month adjusted pretax profit and revenue beat its GBP26 million and GBP168 million forecasts.
Renishaw tightened its annual sales and profit guidance but analysts had feared these would be cut.
"Renishaw has been one of the more debated stocks in our coverage universe this year, and with investors expecting today to trigger a downgrade, there is likely to be a healthy relief rally in our view, supported by the growing news of a US/UK trade deal, given the company meets its US revenue (20% group) via exports from UK, India and Ireland," analysts at Jefferies said.
Brent oil was quoted higher at USD62.75 a barrel late in London on Thursday, from USD61.45 late Wednesday. Gold was lower at USD3,340.18 an ounce against USD3,386.18.
Friday's economic calendar has a UK industrial production reading.
Friday's local corporate calendar has first quarter results from British Airways owner IAG and a trading statement from online property portal, Rightmove.
By Jeremy Cutler, Alliance News reporter
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