The Bank of England said the economy would not recover until the end of 2021
London-listed shares broke a three-day winning run on Thursday as commodities giant Glencore tumbled after scrapping its dividend to pay down debt, while the Bank of England forecast a slower-than-expected rebound from the COVID-19 pandemic.
Glencore dropped 8.1% as it also booked a $3.2 billion impairment charge, driving the FTSE 100 (FTSE) down 1.3%.
With the pound stronger, London shares in miners BHP, Rio Tinto fell after solid gains on Tuesday, as did oil majors BP and Royal Dutch Shell.
The BoE said the British economy would not recover to its pre-pandemic size until the end of next year – later than its earlier estimate, but its projections for 2020 were less grim than in May. There was no immediate case to cut rates below zero, it added.
But, “there is little incentive to rule out negative rates right now and we expect the market to stay very invested in this debate well into 2021,” said strategists at ING. In choosing to keep the bank rate and the asset purchasing program target unchanged, the BoE still has the door open for further policy action – probably at the November meeting.
Despite a stimulus-led rally since April, the FTSE 100 is still down about 20% this year with surging COVID-19 cases raising the spectre of further lockdowns. This compares to a 3% rise for the S&P 500 (SPX) with a U.S. fiscal aid package eyed.
British Housing Secretary Robert Jenrick said new housing starts could be down as much as 40% this year even with the industry showing signs of recovery.
Homebuilders Taylor Wimpey, Barratt Developments and Persimmon lost between 3.7% and 4.3%.
At the other end, insurer Aviva’s shares shot up 4.6% as analysts cheered its decision to reduce focus on Asia and Europe after reporting a 12% drop in first-half operating profit.
The mid-cap FTSE 250 (FTMC) was down 0.9%, with industrial and financial stocks among the biggest drags.
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