Prospect of interest rate boost keeps FTSE up

Hopes for a hefty 1% cut in interest rates kept the FTSE 100 Index in positive territory ahead of the monthly decision from the Bank of England today.

The prospect of a 2% base rate boosted shares in financial and retail companies, while spirits were also lifted by a strong session for Wall Street after the Dow Jones Industrial Average rose 172 points.

The FTSE 100 Index was ahead 63.2 points at 4233.2 by mid-morning, a performance mirrored in France and Germany as the CAC 40 and DAX also registered gains of more than 2% prior to the European Central Bank’s rates decision.

Housebuilders were among the beneficiaries after mortgage lender HBOS pledged to pass on future rate cuts.

Barratt Developments topped the FTSE 250 Index risers board, up 14% or 7.75p to 61.25p, while Persimmon was close behind with a rise of 19p to 202.75p.

Bellway highlighted the scale of the housing market slump in a trading update, but shares were up 23.5p to 522p as investors in the Newcastle-based company also cheered guidance that it will reduce debt by £100 million this year.

Supermarket Morrisons provided the main interest in the FTSE 100 after it posted an 8.1% rise in like-for-like sales for the third quarter. But with analysts expecting strong figures, the shares gain was limited to half a penny at 251p.

The rest of the retail sector was on the front foot, with Marks & Spencer ahead 4.5p to 226.75p on the day it held its second 20% off sale. Next rose 30p to 1043p.

Outside the top flight, shares in recruitment firm Michael Page International fell 10% after it warned it would only meet the bottom end of City forecasts for annual profits. Shares were down 20p to 173p.