London market dives 6% on shock rate cut

The London market dived almost 6% today in the wake of the Bank of England’s shock 1.5% interest rate cut.

The drastic move stunned stock markets and wiped more than £62.3 billion from the FTSE 100 Index as it brought home the growing prospect of a prolonged recession.

Downbeat retail sales and employment figures from the US added to the gloom, leaving the top-flight index 258.3 points lower at 4272.4 by the close.

Businesses cheered the bank’s decision, but the market reaction suggested attentions had now returned to the state of the British economy.

CMC Markets trader Jimmy Yates said: “The fact the BoE jumped in with a huge 150-basis-point cut certainly gave the market a wake-up call.”

High street giant Marks & Spencer was one of a handful of blue-chip stocks in positive territory amid hopes the cut could tempt consumers back into the shops.

M&S was the FTSE’s leading riser, up 8p to 252.75, or 3%. In the FTSE 250, rival Debenhams – which has significant debt – initially soared 13% but gave back the gains to stand 1.75p lower at 35p.

Elsewhere in the top-flight however trading screens turned red. Hedge fund Man Group was the biggest casualty after it revealed the global financial turmoil had knocked nearly a quarter off interim profits and left assets under management lower than forecast.

Shares in the group plunged 31% or 122.25p to 270p.

Investors also dumped commodities stocks on the latest recession concerns, with mining firms littering the fallers’ board. Eurasian Natural Resources was the biggest casualty, off 69.25p at 289.75p.

Meanwhile crude oil shed four dollars to 61 dollars a barrel, leaving BP 30p lower at 493p and Royal Dutch Shell 125p lower at 1647p.