FTSE 100 tumbles on Bank of England’s cautious tone after rate cut

Bank of England governor Andrew Bailey said policymakers ‘need to be careful not to cut rates too much or too quickly.’

Andrew Bailey, governor of the Bank of England, speaking at Threadneedle Street on Thursday (Alberto Pezzali/PA) (PA Wire)

The FTSE 100 suffered a big loss on Thursday after the Bank of England warned against making further interest rate cuts too quickly.

The blue-chip index fell 85 points to end the day on 8,283, a 1% fall.

Markets initially rose after the Bank cut rates to 5%, a quarter point drop.

But after governor Andrew Bailey’s tone of caution in the subsequent press conference, banks and financial firms fell into the red.

Mr Bailey said after the rate cut announcement: “We need to put the period of high inflation firmly behind us.

“And we need to be careful not to cut rates too much or too quickly.”

NatWest fell 7.4%, HSBC slipped 6.8% and Lloyds dropped 5.2%.

Meanwhile, France’s CAC 40 fell 2.1%, while Germany’s Dax fell 2.3%.

Stateside, the S&P 500 was down 1% as markets were closing in London, while the Dow Jones was down 1.3%.

The pound was down 0.6% at 1.278 US dollars and was down 0.3% at 1.184 euros.

In company news, shares in Barclays fell by as much as 5% after the bank revealed a drop in its half-year profits.

Nevertheless, the banking group lifted its outlook for net interest income for the year to around £11 billion, partly as a result of fewer interest rate cuts now being pencilled in.

It also confirmed plans to buy back another £750 million in shares in the third quarter.

Its share price closed 4.7% lower.

On the other hand, shares in fashion chain Next were given a boost after the company upgraded its profit targets for the year.

Next said its sales had been stronger than it was expecting, particularly overseas, and that it managed to make more cost savings.

It also said its finances had been buoyed after taking over fashion firm FatFace and increasing its share of Reiss.

Shares in Next closed 8.3% higher.

The price of a barrel of Brent crude oil was down 0.5 to $79.32 US dollars as markets were closing in London.

The biggest risers on the FTSE 100 were Next, up 756p to 9830p, Rolls-Royce, up 31.5p to 481.1p, Smith & Nephew, up 76p to 1199p, London Stock Exchange, up 382p to 9852p, and Haleon, up 8.4p to 358p.

The biggest fallers on the FTSE 100 were Melrose Industries, down 73.8p to 515p, Schroders, down 38.2p to 354.6p, NatWest Group, down 29.7p to 338.4p, HSBC, down 45.5p to 658.5p, and Standard Chartered, down 45.8p to 721.4p.