(Alliance News) - The FTSE 100 rallied at the open on Wednesday as the pound softened on a surprise rate cut from the Bank of England.
Meanwhile, blue-chip housebuilders were higher ahead of the UK budget due at midday.
The FTSE 100 index was up 59.48 points, or 1.0%, at 6,019.71 early Wednesday. The mid-cap FTSE 250 index was up 160.88 points, or 0.8%, at 17,707.93. The AIM All-Share index was up 0.8% at 812.43.
The Cboe UK 100 index was up 0.5% at 10,181.25. The Cboe 250 was up 0.5% at 15,692.54, and the Cboe Small Companies down 0.3% at 10,782.12.
The Bank of England early Wednesday followed the US in announcing a surprise interest rate cut as it responded to the "economic shock" from the Covid-19 virus.
The Monetary Policy Committee unanimously decided to cut UK interest rates by 50 basis points to 0.25% from 0.75% at a special meeting ending on Tuesday, back to the record low reached in the aftermath of the vote to leave the EU in 2016.
The rate cut, coming just ahead of the UK government budget, followed the US Federal Reserve last week unexpectedly cutting the federal funds rate by 50 basis points.
The Bank Rate cut should "help to support business and consumer confidence at a difficult time", the BoE said, as well as bolstering cash flows of businesses and households.
Sterling was quoted at USD1.2915 early Wednesday, down from against USD1.2942 at the London equities close on Tuesday, but rebounding after dropping below USD1.29 following the central bank announcement.
"Highly unusual for the BoE to move between meetings - didn't even happen in the financial crisis after the stockmarket had crashed. In the BoE's mind, they can probably cut rates another 0.15% and do another round of QE equivalent to a further 1.5% to 2% of monetary easing," said David Owen, chief European financial economist at Jefferies.
"The budget today should contain a relatively large and targeted fiscal response. Immediately after the financial crisis, the fiscal easing was equivalent to just over 2% of GDP - hoping to see something similar today," Owen added.
Attention in the UK on Wednesday now turns to Chancellor Rishi Sunak and his budget at 1230 GMT.
Michael Hewson at CMC Markets said: "We shall have to wait and see but we should pay close attention to construction stocks, as well as the housing sector when the Chancellors steps up later today."
Blue-chip housebuilders such as Persimmon, Taylor Wimpey and Barratt Developments were up 4.7%, 4.4% and 4.2% respectively ahead of the budget.
"We can also expect to see extra money for healthcare, even without this morning's surprise news that junior health minister Nadine Dorries has been diagnosed with coronavirus," Hewson continued.
The Conservative MP said she has been self-isolating at home after testing positive and her parliamentary office has closed following advice from Public Health England. She is the first MP to be diagnosed with the illness. The number of cases in the UK rose to 382, and a sixth death was confirmed.
Meanwhile, the number of cases in the US surged past 1,000, after public health experts criticized authorities for downplaying the epidemic and lagging behind in testing efforts.
At least 28 people have died and 1,025 people have been infected in the US, according to a running tally by Johns Hopkins University – nearly double the 550 total confirmed cases the day before. Epidemiologists have said faulty test kits coupled with a diagnostic strategy that initially targeted too few people allowed the disease to spread beyond US authorities' ability to detect it.
Italy's death toll from Covid-19 has risen by a third to 631. China remains the hardest-hit overall with more than 80,000 cases and over 3,000 deaths, out of a global total of 117,339 cases and 4,251 deaths across 107 countries and territories, according to an AFP tally.
Elsewhere in the economic calendar on Wednesday, there is a UK GDP reading at 0930 GMT followed by US inflation at 1230 GMT.
In mainland Europe, the CAC 40 in Paris was up 2.1% while the DAX 30 in Frankfurt was 1.8% higher early Wednesday.
In Asia on Wednesday, the Japanese Nikkei 225 index ended down 2.3%. In China, the Shanghai Composite closed down 0.9%, while the Hang Seng index in Hong Kong closed down 0.6%.
The euro traded at USD1.1325 early Wednesday, soft versus USD1.1342 late Tuesday. Against the yen, the dollar was quoted at JPY104.90, up from JPY103.94.
Gold was quoted at USD1,662.06 an ounce early Wednesday, up from USD1,655.61 on Tuesday. Brent oil was trading at USD36.64 a barrel early Wednesday, flat on USD36.63 late Tuesday.
In London, Balfour Beatty was up 7.7% as it reported a rise in profit for 2019.
Revenue for 2019 grew by 7.7% to GBP8.41 billion from GBP7.81 billion the prior year, with pretax profit up 12% to GBP138 million from GBP123 million. Balfour lifted its dividend to 6.4p from 4.8p.
Looking ahead, the firm said it has "confidence" it will continue to deliver "profitable managed growth".
"While Covid-19 continues to evolve, Balfour Beatty is monitoring developments closely, looking to mitigate the risk that it may have on the group's employees, customers and supply chain. At this point in time, all sites and offices in the UK, the US and Hong Kong remain open. However, it is too early to fully assess any impact of the outbreak on the operational and financial performance of the group," said Balfour.
Balfour investors will be looking out for any indications of increased UK infrastructure spending in the budget later.
G4S shares sank 11% as profit in 2019 slumped on an impairment.
Revenue was up 3.4% to GBP7.76 billion, but the security firm saw profit tumble to just GBP27 million from GBP142 million. This reflected a GBP291 million goodwill impairment largely related to its UK Cash Solutions unit.
Last month, G4S agreed to sell the majority of its conventional cash handling businesses for an enterprise value of GBP727 million.
By Lucy Heming; lucyheming@alliancenews.com
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