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Britain's FTSE turns higher after new Bank of England stimulus

(ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)

By Atul Prakash

LONDON, July 5 (Reuters) - Britain's top shares index rose on Tuesday, lifted by new measures from the Bank of England to prop up the economy in the wake of the country's vote to leave the European Union.

The blue-chip FTSE 100 index initially fell by some 0.6 percent but then rose on the back of the Bank of England's new measures to stand 0.5 percent higher at 6,552.45 points by the middle of the trading session.

The British stock market also outperformed falls elsewhere in Europe, with the pan-European STOXX 600 down 1.1 percent while Germany's DAX down 1.4 percent.

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The Bank of England took steps to ensure British banks keep lending and insurers do not dump corporate bonds in what it said was a "challenging" period likely to follow the June 23 "Brexit" vote to quit the EU.

The latest measures announced by BoE Governor Mark Carney pushed down sterling, which in turn gave a lift to the FTSE 100, since a weaker pound can help exports from the index's international companies.

"The FTSE has been bolstered by the Bank of England's latest set of measures, which should help to counter the negative effects of Brexit," said Securequity sales trader Jawaid Afsar.

Nevertheless, the negative effects of Brexit could still be seen in the property and housebuilding sector.

Real estate (OTC BB: REACD - news) investment trusts fell after Standard Life (LSE: SL.L - news) Investments suspended trading in a real estate fund and housebuilding stocks dropped on worries about the sector's outlook after the Brexit vote.

Standard Life Investments Property Income Trust slumped 9.4 percent, having earlier touched its lowest level since late 2013, while Land Securities (LSE: LAND.L - news) , British Land (LSE: BLND.L - news) and Intu Properties (Other OTC: CCRGF - news) also lost ground.

Housebuilders Barratt Development, Taylor Wimpey (LSE: TW.L - news) and Berkeley Group all fell around 5 percent.

Housebuilder Persimmon also dropped 4.3 percent, despite reporting higher first-half revenues.

"You wouldn't guess from Persimmon (Other OTC: PSMMF - news) 's results that the company has lost around a third of its value in the last fortnight," Hargreaves Lansdown (LSE: HL.L - news) analyst Laith Khalaf said.

"That's because the stock market is looking forward to the next six months and beyond, and the Brexit vote is casting a long shadow over the UK house building sector ... Until we get a picture of housing activity following the referendum result, the stock market is likely to push the sell button first."

While the FTSE 100 has partially recovered and is up about 3 percent since June 23, it remains down by about 10 percent in U.S (Other OTC: UBGXF - news) . dollar terms, as the slump in sterling has reduced the dollar value of the British market. (Additional reporting by Sudip Kar-Gupta; Editing by Mark Heinrich)