Blue chips plunge after Bank of England’s rate cut

LONDON’S blue chip shares plunged back into negative territory yesterday, as the market suffered a delayed reaction to the Bank of England’s decision to slash rates.

After the briefest of rallies, share prices slid lower with the FTSE 100 Index closing at 3597.0, down 81.7 points.

Investors were wrong-footed by the quarter-point reduction to 3.75%, the lowest rate since 1955. Most economists had forecast rates would be unchanged.

Simon Buckingham, head of UK dealing at stockbroker Gerrard, said: “The market has not reacted very well to the Bank of England rate cut.

“There are fears that the economy is not as well as we thought. After an

initial mark-up of shares, sellers have been pouring in to the market.”

Equities were hampered in the afternoon by the European Central Bank’s decision to leave interest rates unchanged. The move raised concerns that growth could struggle to recover in Britain’s largest export market. The ECB, which sets monetary policy for the 12 nations sharing the euro currency, left its rate at 2.75%.

The biggest Footsie risers were Northern Rock up 10p at 640p, Cadbury Schweppes up 2.25p at 328.5, Marks & Spencer up 2p at 312p, Boots up 2.5p at 537.5p, and Scottish & Southern Energy up 2.5p at 610.5p.

The fallers were ICI down 14p at 190p, Tomkins down 10.25p at 193.5p, Shell down 18.5p at 360p, Royal Bank of Scotland down 65p at 1375p, and Capita Group down 9.5p at 202p.