Rate cut soothes FTSE

The FTSE 100 was down 93.05 points at 4437.68 and the FTSE fell to 6690.21, down 67.25 points, at 12.28pm today.

Although still weak, the market was well clear of earlier lows (it was down 212.75 points at 11.26am) thanks to the Bank of England, which slashed interest rates to 3 per cent from 4.5 per cent at noon. The size of the cut was unexpected – most analysts were expecting a half or one point cut – and met with a mixed response: some market participants read the move as a belated acknowledgement of the tougher economic times at hand while others wondered if the reduction was a signal that most analysts had misjudged the severity of the recession.

Moving up

Old Mutual, up7.28 per cent or 3.9p at 57.5p, claimed first place on the Footsie after the market welcomed news that, contrary to recent speculation, its capital surplus was above target at £800m at the end of October. Cazenove remained cautious, however.

“We assume that the group will not pay a dividend for the foreseeable future in light of the bare minimum solvency position and in the absence of a credible plan to restore it once [the] Bermudan hedging and closure costs are deducted,” the broker said, reiterating its “underperform” rating on the stock.

Cazenove was more positive on International Power, which, at second place on the Footsie, was up 6.54 per cent or 16.75p at 273p after positing its interim management statement, guiding that it is “on track to deliver another year of growth”.

“IPR also states that ‘our portfolio is performing well with First Hydro and Deeside delivering ahead of expectations, which will significantly offset the impact of the outages at Rugeley, Hazelwood and ISAB’,” the broker said,

“We are therefore increasing our 2008 earnings per share estimate by 5.6 per cent from 28.5p to 30.1p, which is 8.7 per cent above consensus of 27.7p.”

Moving down

Man, the London-based hedge fund group, was the weakest on the senior index, down almost 30 per cent or 116.25p at 276p after reporting lower than expected interim pre-tax profits. Funds under management were also down, falling from $70.3bn in its pre-close trading statement to $67.6bn at the end of September.

A weaker than expected half yearly report also weighed on Invensys, which, at second place on the loser board, down 10.02 per cent or 16.8p at 150.8p.

In the mining sector, lower commodities prices encouraged another round of profit taking. An uninspiring first half report from Vedanta Resources, down 7.05 per cent or 74p at 844p, added to the selling pressure and as a result, Anglo American was down 110p at 1447p while the Eurasian Natural Resources Corporation eased back to 343p, down 16p. Kazakhmys fell to 341.25p, down 13p, and Xstrata lost 79p to 1111p.