Rate cuts sends market plummeting

Blue chip stocks saw more heavy losses today as disappointment over the Bank of England’s quarter-point interest rate cut sent the London market plummeting 2.6%.

Downbeat results from heavyweights BT, GlaxoSmithKline and Rolls-Royce also combined to drag the FTSE 100 Index into the red.

The Footsie closed down 151.3 points at 5724.1, with much of the fall coming after the Bank of England’s interest rates decision.

The 0.25% cut had been widely forecast, but many had hoped for a bolder move, particularly in the wake of America’s recent aggressive rate-slashing.

Glaxo announced results at the same time as the Bank’s decision, with the drugs giant alarming investors with its comments about 2008 trading prospects.

Shares were 8% or 89p lower at 1078p – accounting for a noticeable slice of the Footsie’s fall – after Glaxo said it expected lower sales of its Avandia diabetes treatment and heavier competition from rivals.

BT and Yell were also punished after the telecoms-based pair provided the City with cause for concern in third quarter results.

Yell topped the fallers board after the Yellow Pages and Yell.com directories business lowered revenues guidance for the current quarter because of the weaker economic environment in the UK.

Shares were off 50.25p at 279.75p, a drop of 15%, while BT was down 10% following a disappointing trading update. The fall of 25.75p to 237p reflected shareholder anxiety after the company missed the City’s third quarter revenues target and failed to add as many broadband customers as hoped.

Rolls-Royce was also on the back foot, despite the engines giant offering a 35% dividend boost. Underlying profits rose 13% to £800 million, but this was marginally below analysts’ hopes for a 14% rise. With the impact of the weak US dollar continuing to weigh, shares fell 49p to 431p.

The biggest gain of the session came from gas and exploration firm BG, which climbed 4% after it posted a 25% rise in fourth quarter profits and raised reserves estimates for a Brazilian field, causing shares to jump 41p to 1118p.

Carphone Warehouse meanwhile benefited from BT’s news that it was losing broadband customers to competitors such as Carphone and BSkyB. Shares gained 3.5p to 309.25p.

Elsewhere, shares in easyJet failed to cling to early gains seen after the budget airline delivered a reassuring trading update and stuck by its guidance for a 20% profits hike in the current financial year.

Sentiment weakened as the session wore on, leaving the airline’s shares 6% or 28.75p lower at 419.5p.

And Halfords shares fell 9p to 270.25p after the retailer reported slower sales and the departure of chief executive Ian McLeod.

The biggest Footsie risers were BG Group up 41p at 1118p, Smith & Nephew ahead 9p at 634p, Carphone Warehouse up 3.5p at 309.25p and Tullow Oil up 5.5p at 586.5p.

The biggest Footsie fallers were Yell Group down 50.25p at 279.75p, Rolls-Royce Group down 49p at 431p, Alliance & Leicester off 65p at 588p and BT Group down 25.75p at 237p.