BoE Unanimous Decision, Pound Below $2

123jump.com Staff
19 Dec, 2007
New York City

The Bank of England committe members were unanimous in their decison to lower rates this month in the wake of credit market malaise. The pound fell below $2 level on the growing consensus that the BoE will keep lowering rates in the coming weeks to calm nervous credit markets. FTSE 100 Index inched higher led by a rise in Royal Dutch Shell, Northern Rock, 3i Group, and Johnson Matthey. Banks declined.

[R]2:00PM New York, 7:00PM London - UK advanced led by Northern Rock. Bank of England was unanimous in its decision to lower bank rate.[/R]

In London trading, FTSE 100 inched 0.14% or 5.2 at 6,297.5 on Wednesday.

The troubled Northern Rock rose 4.4% after Prime Minister Gordon Brown indicated that nationalization of the bank was another option for reviving financial institution.

Gordon Brown said on Wednesday that nationalization will still be option to rescue Northern Rock. Brown dismissed allegations that he had ignored calls for the nationalization of the bank but indicated that a private investor would rescue UK largest mortgage lender.

Of the FTSE 100 index stocks, Northern Rock, Johnson Matthey, Rentokil Initial, Persimmon, Royal Dutch Shell, and 3i Group led the gainers.


Economic News

The Bank of England committee unanimously agreed to lower rate by 25 basis points to 5.5% against fallout from financial market turmoil contrary to what most people had expected a divided decision among the members.

According to minutes of the meeting held on December 6th released on the BoE website on Wednesday, all policy makers agreed to decrease the bank rate with immediate effect arguing it was necessary to meet inflation target in the medium term.

""The Governor invited the Committee to vote on the proposition that Bank Rate should be reduced by 25 basis points to 5.5%. The committee voted unanimously in favour of the proposition,"" read the minutes. It is the first unanimous decision for a reduction since the aftermath of the September 11, 2001 attacks in the U.S.

Total net investment by insurance companies, pension funds and trusts was 30.9 billion pounds in the third quarter of 2007, 7.0 billion pounds higher than in the second quarter of 2007.

The National Statistical Office said this rise mainly reflected increased net investment of 7.1 billion pounds in UK company securities and short-term assets and net investment in other assets increased by 2.5 billion pounds in the period.

These increases were partly offset by decreases in net investment in British Government debt securities and overseas securities of 4.7 billion pounds and 4.2 billion pounds respectively. In the third quarter of 2007 long-term insurance funds reported net investment of 8.8 billion pounds, 5.2 billion pounds higher than in the second quarter of 2007.

General insurance funds showed a net disinvestment of 0.7 billion pounds, 0.3 billion pounds lower than the previous quarter, while net investment by self-administered pension funds rose by 0.9 billion pounds to show a net investment of 14.9 billion pounds.

Investment trusts reported net disinvestment of 0.3 billion pounds in the third quarter of 2007 compared with net disinvestment of 0.1 billion pounds in the second quarter.

Net investment by unit trusts and property unit trusts decreased by 5.4 billion pounds from 11.5 billion pounds in the second quarter of 2007 with the total net investment of 6.1 billion pounds in the third quarter of 2007.

Leading Gainers

Of the FTSE 100 shares, Northern Rock gained 4.4% followed by Johnson Matthey at 3.7%, Rentokil Initial at 2.8%, Persimmon at 2.5%, Royal Dutch Shell at 2.4%, and 3i Group at 2.3%.

Leading Decliners

Of the FTSE 100 Index shares, Kingfisher plc led the decliners with a loss of 4.4% followed by losses in Intercontinental of 2.2% Anglo America of 2.2%, in Barclays of 2% and Centrica Plc of 1.9%.