FTSE closes lower as earnings disappoint BoE rate causes no surprises

The FTSE 100 closed lower on Thursday as traders sold out of heavyweight mining and banking equities whilst disappointing earnings from Diageo and Air France also weighed on sentiment.

There was little reaction in equity markets to today’s move by the Bank of England who held UK interest rates on hold at 0.5%, which was widely expected. All attention will now focus on the minutes of the meeting due out in a few weeks time to see whether the shift of power amongst committee members is switching further to Andrew Sentence and his calls for an interest rate hike.

Solid earnings from Rio Tinto who doubled their dividend was also shrugged off from investors who sold their shares in the miner, forcing prices lower by 2.6%. The fall in share price of Rio Tinto tracked a largely weaker mining sector, which fell 1.5% on a 0.3% fall in Copper prices.

Indeed, Diageo was the top faller after the firm missed market expectations with a 9% rise in first half earnings. Much of this was related to poor performance in Ireland, Spain and Greece where sales fell 13% and throwing caution to the wind, the firm maintained that an early recovery in those regions was not forecasted soon.

We have however started to see investors buy into the price of Crude Oil after rumours speculating that President Mubarak is set to step down immediately. The price of Nymex Crude has rallied from $86 per barrel to as high as $87.70 in the space of a few hours this afternoon and so clearly investors are buying into hopes that the instability in the region is set to become much calmer should Mr Mubrarak step down. Throughout the day there was also false rumours that Saudi Arabia’s King Abdullah had died and so this has also kept a nervous edge to trading and shows just how sensitive traders are to stories emanating out of the Middle East.

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