The FTSE 100 fell on Thursday after the Bank of England moved to cut interest rates by 0.25% and ex-dividends weighed on the index.
London’s leading index was trading at 9,098, down 0.7% at the time of writing.
As economists had predicted, the Bank of England cut interest rates by 0.25% to 4% in the face of mounting pressure to help stimulate the UK economy after a string of soggy data points.
With unemployment increasing amid tepid GDP growth, the Bank of England had little choice but to reduce borrowing costs, despite inflation jumping in the wake of Donald Trump’s tariffs.
However, the 5-4 split in the vote to cut interest rates reflects an indecision among voting members that reduces the chance of future rate cuts.
“It’s about time the Bank got on with it. A cut was a done deal, but the question now is how far does the Bank of England go – while today’s cut was easy, it gets harder from here,” said Neil Wilson, Investor Strategist at Saxo
The prospect of fewer rate cuts in the months to come weighed on investor sentiment, and the FTSE 100 extended losses as the decision broke.
Housebuilders, a reliable barometer of UK investor sentiment, immediately fell as the rate decision was announced. Persimmon was down 1% while Taylor Wimpey gave up 1.2%.
Ex-dividends and WPP
The FTSE 100 lagged gains in European shares and US futures before the rate decision, predominantly due to the impact of ex-dividends.
Several dividend-heavyweights, including AstraZeneca, BT, Barclays and NatWest, traded ex-dividend on Thursday, wiping off a considerable number of points from the index.
Poor corporate updates also dragged on the index.
WPP was lower after the advertising group shed further light on their troubles in the group’s first half results. A trading statement released in July sent shares into freefall as WPP outlined slowing revenues and disruption to their business caused by AI.
WPP shares fell another 2% on Thursday as the group slashed its dividend in half amid falling revenues across all business segments.
“It’s a measure of just how beaten down WPP’s share price is that today’s results only provoked a modest sell-off in the shares,” said AJ Bell head of financial analysis Danni Hewson.
“Make no mistake this was a really weak set of numbers – the last under departing CEO Mark Read.
“Rebasing the dividend takes an unpopular decision out of the hands of incoming CEO Cindy Rose. She will have plenty on her plate when she starts at the beginning of next month with a strategic review of the business.
“At one time WPP was considered a bellwether for the wider economy – given the breadth and depth of its operations and the link between advertising spend and clients’ confidence in their future prospects. However, it is now so consumed by its own problems this wider relevance has diminished.”
Hikma was the FTSE 100’s top faller on Thursday, shedding 7%, after announcing a sharp drop in operating profit due to one-off items. However, revenues were higher and Hikma were confident in an improvement later in the year. Possibly a buying opportunity.
A positive assessment of the macro environment by InterContinental Hotels Group helped shares to the top of the FTSE 100 leaderboard with a 6%.
Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts, said:
“We remain on track to meet full year consensus profit and earnings expectations. While some shorter term macro-economic uncertainties remain, many are subsiding, and we are confident in the ongoing successful delivery of our growth algorithm, driven by the strength of IHG’s enterprise platform and our ability to further capitalise on our scale, leading positions and the attractive long-term demand drivers for our markets.”