By Michael Taylor
LONDON, April 10 (Reuters) - Britain's top share index ended
a choppy session lower on Thursday after the Bank of England
(BoE) cut interest rates as expected and warned over rising
inflation.
The FTSE 100 <> ended 18.8 points or 0.3 percent lower
at 5,965.1 after earlier touching a low of 5,881.9 as the BoE
cut interest rates for the third time in five months to cushion
the economy from the global credit squeeze.
The bank said the quarter percentage point reduction in its
main rate to 5.0 percent was justified even though inflation was
likely to spike in the short term. []
"It's the right reaction," said Paul Kavanagh, a partner at
stockbroker Killik & Co, who added that a positive start to
trading in the U.S. had helped ease larger UK losses.
"They are playing a measured game. It's the style of the BoE
and they are not deviating from their pathway. They have kept
their powder dry and they were under intense pressure from
everybody to take more dramatic action.
"It was the right decision," he added. "There is probably a
25 percent chance of a follow up rate cut next month but
probably the preference is to keep things steadily on hold."
Banks were one of the biggest drags on the index, after
Lehman Brothers <LEH.N> said it had liquidated three of its
funds. Barclays <BARC.L>, Royal Bank of Scotland <RBS.L>,
Alliance & Leicester <ALLL.L>, HBOS <HBOS.L>, Standard Chartered
<STAN.L> and Lloyds TSB <LLOY.L> were all down between 1.5 and
5.8 percent.
News that Lehman Brothers had liquidated three floundering
investment funds that lost value and ended up taking $1 billion
of assets onto its balance sheet hit the sector already beaten
by months of credit worries.
"It's been a day of few surprises with the BoE quarter point
rate cut having been widely expected anyway, whilst the
seemingly inevitable talk of more write downs... is putting the
financial sector back in the spotlight," said one London trader.
Miners also suffered after BHP Billiton <BLT.L> said it was
not aware of any plan by China to buy a stake in the company,
while the Australian government said it would look closely at
any moves by Chinese entities to buy shares in BHP. The world's
biggest miner fell 2.6 percent.
Also in the mining sector, Rio Tinto <RIO.L>, Lonmin
<LMI.L>, Xstrata <XTA.L>, Anglo American <AAL.L> and Vedanta
Resources <VED.L> were down between 0.3 and 2.2 percent.
Eurasian Natural Resources <ENRC.L> bucked the trend to gain
6.7 percent as traders pointed to positive broker comment from
ABN AMRO, which chose the stock as one of its top picks.
The Kazakh mining group posted a strong rise in annual
profit on Wednesday and was conducting routine investor
briefings.
PROPERTY STOCKS SUFFER
UK commercial property stocks reacted soberly to the BoE's
decision to cut the UK base borrowing rate.
British Land <BLND.L>, Segro <SGRO.L>, Hammerson <HMSO.L>
and Liberty International's <LII.L> fell between 2.3 and 4
percent.
Property market commentators say the base rate cut would do
little to alleviate congestion in domestic money markets -- a
situation that is slowly starving some real estate companies of
debt and threatening occupational demand for their properties.
Among individual stocks, DSG International <DSGI.L> shed 8.5
percent after the pan-European electrical goods retailer issued
its second profit warning in three months, saying it was
increasingly having to cut prices to maintain sales.
British Energy <BGY.L> offered some support, tacking on 5.4
percent after sources close to the matter said Germany's RWE
<RWEG.DE> and Britain's Centrica <CNA.L> have both made
indicative bids for the UK nuclear power operator valuing it at
up to 11 billion pounds. []
British Energy, RWE and Centrica, whose shares added 0.5
percent, all declined to comment.
In other M&A related news, mid-cap Enodis <ENO.L> jumped
51.8 percent to 227.016 pence after U.S. Manitowoc Co Inc
<MTW.N> confirmed it had approached Enodis about a possible cash
offer valuing the UK company at 260 pence per share.
(Additional reporting by Dominic Lau and Rebekah Curtis;
Editing by Paul Bolding)
