At the close: Just as things settle down Carney makes sure everyone's still on their toes

 
Billy Bambrough
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Mark Carney Unveils New Polymer Five Pound Note
Lend us a fiver: Markets have cheered Carney's announcement (Source: Getty)

Just as the political situation had stolen the limelight from the markets in the aftermath of the UK's vote for Brexit, Mark Carney grabs it back.

Carney, the governor of the Bank of England (BoE), told markets earlier this afternoon to expect a cut in interest rates as he warned the economy was in for a period of prolonged uncertainty and significantly slower growth in the wake of the EU referendum.

Markets went wild with the FTSE 100 climbing to highs not seen since last August at the prospect of seemingly never-ending free money.

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The UK's blue-chip index jumped 2.27 per cent to 6,504.33 – the highest close since 18 August 2015 when it finished at 6,526.29.

Carney said an interest rate cut below 0.5 per cent as well as more extreme and unconventional measures, such as quantitative easing, would also be considered.

Carney indicated rate cuts or an extension to the £375bn bond-buying programme could come as early as the next MPC meeting on 14 July.

The FTSE 250 also climbed higher, up 1.7 per cent to finish at 16,271.07. The mid-cap index is still down heavily compared to last Thursday's close ahead of the referendum result.

Joshua Mahony, market Analyst at IG, said:

This week has largely seen the FTSE disregard the fears associated with Friday’s vote aside despite one of the biggest political storms seen in decades.

There has been a noticeable difference between the FTSE 100 and it’s Western counterparts, as investors abroad see the value in UK shares given the weak pound and likeliness of a new round of easing at the BoE.

Sterling took a hit following Carney's comments, though remained above its post-Brexit 31-year low of $1.3118. The pound was quoted at $1.3294 at the market close.

3i Group was the best performer in the FTSE 100, up 7.8 per cent after reporting an increase to its book value of its investment in Action, the Benelux-based non-food retailer, following strong trading.

Mining stocks also performed well, with the FTSE 350 Mining sector index up 3.8 per cent.

Antofagasta climbed five per cent, while Glencore was up 4.2 per cent. Anglo American finished 4.2 per cent higher.

Now listen: City A.M. podcast – After the Brexit vote, what next for the UK economy?

At the other end of the scale Royal Bank of Scotland Group lost 4.8 per cent after being downgraded to equal weight from overweight by Morgan Stanley.

Housebuilding company Travis Perkins ended down 1.6 per cent after Berenberg downgraded it to hold from buy.

In the FTSE 250, esure Group ended among the biggest mid-cap gainers, up 9.8 per cent after shooting down speculation it could be bought by private equity suitors.

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