London Stocks Tumble as BoE Cuts Interest Rates, Banks Take Hit

London stocks declined by approximately 1% on Thursday, impacted by significant losses in the financial sector. The BoE cut interest rates but signaled caution for further reductions. The FTSE 100 dropped 1.0%, and the FTSE 250 fell 1.1%. Financial, industrial metal miners, and energy sectors were particularly affected.

London stocks declined around 1% on Thursday, driven by losses in the financial sector as the Bank of England reduced interest rates from a 16-year high but indicated a cautious stance on additional cuts.

The blue-chip FTSE 100 index dropped 1.0%, marking its worst day in over three months, while the mid-cap FTSE 250 slid 1.1%. Major banks faced their largest one-day decline since February 2022, plummeting 6.1% after Societe Generale lowered its earnings forecast for retail net interest income.

Industrial metal miners also contributed to market woes, falling 1.9% as copper prices dipped due to worse-than-expected factory data from China and increasing inventories reflecting an oversupply. The BoE's rate cut of a quarter point to 5% marked its first reduction since 2020, after a split decision among policymakers. BoE Governor Andrew Bailey cautioned that future rate cuts would be approached carefully, given the ongoing debate over inflation pressures.

The pound hit a one-month low, declining 0.5% against the U.S. dollar. In contrast, the rate-sensitive real estate and real estate investment trust sectors both rose nearly 0.5%. Also up were aerospace and defence shares, gaining 1.3% following a strong performance by Rolls-Royce. Energy giant Shell lost 0.5% despite beating profit forecasts with $6.3 billion, a 19% decline quarter-on-quarter.

(With inputs from agencies.)