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9-0 from the Bank of England

Much is said of the hawks and doves on the Bank of England’s Monetary Policy Committee, but as far as the shock 1.5% November interest rate cut to 3% was concerned, they were all doves. This was revealed from the minutes of the last meeting, with the only question left now being when the next move will be.

Traditionally the sector which is in the direct firing line as far as interest rates goes up or down is the banking area. This was in focus today over and above the news regarding the BoE minutes as Lloyds TSB (LLOY) shareholders vote on whether to accept the deal with HBOS (HBOS). Given that the share prices of both have essentially halved since the move was announced it may be regarded as turkeys voting for Christmas. But with Lloyds’s shares at 130p it may be that there is little left to lose at current levels.
What have perhaps not helped are the way that the FTSE 100 was down as much as 2% in the first part of the session as investors fretted over the fate of the US automakers, and the way that the $700bn bailout appears to have been downgraded. The main casualties were spread among the mining and retail sectors, with Lonmin (LMI), Xstrata (XTA), and Kazakhmys (KAZ) down between 7% - 10% on fears that demand will decline in the wake of the economic slowdown. Retailers DSG International (DSGI) and M&S (MKS) were also hit hard in sympathy with news that Woolworths is in talks to sell its retail business.
Company news was a little more bullish than expected, with credit check group Experian (EXPN) beating H1 estimates on lower interest rate costs, even though its business is lead by the beleaguered consumer. The shares were up 10%. There was also good news in the form of a dividend hike from British Land (BLND). However, this was not enough to counteract the pain associated with a 10% fall in property values over the past 6 months, and the way that this led to a £1.4bn writedown to put the group in the red to the tune of £1.3bn.
 

Head of Research at Blue Index, specialists in trading

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19/11/08

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