BUSINESS LIVE: BoE cuts interest rates; Rolls-Royce shares surge to record high; Next profits expected to approach £1bn

Rio Tinto has rejected calls from an investor to delist from the UK and focus on Australia – a boost for the London Stock Exchange.

The mining giant has a primary listing in London and also trades shares on the Sydney Stock Exchange.

Rolls-Royce has resumed paying a dividend and raised its full-year forecast after CEO ‘Turbo’ Tufan Erginbilgic made progress with his profitability campaign in the first half of the year.

The FTSE 100 aircraft engine maker reported underlying operating profit of more than £1.1 billion for the first six months of the year, up 70.7 percent from £673 million last year.

Erginbilgic has implemented a strict cost-cutting programme, expected to reduce spending by £200m a year by the end of 2025, and has paid down some of Rolls’ significant debt.

Laith Khalaf, Head of Investment Analysis at AJ Bell:

‘As for how interest rates will develop from here, the Bank’s latest statement contains mixed signals.

‘The fact that four of the nine members wanted to leave the interest rate unchanged shows that there is still a significant degree of aggressive attitude within the interest rate committee.

‘But according to the Bank’s figures, if it cuts rates in line with market expectations, inflation is expected to be 1.5% in three years. That opens up the possibility of more drastic rate cuts than the market currently estimates.

“It is important to remember that today’s interest rates are not unusual compared to historical norms. The extreme shock that millions of homeowners felt when they refinanced their mortgages is due to the unnatural monetary conditions that prevailed during the previous decade of ultra-loose monetary policy.

“Even if more rate cuts come, no one should be under any illusion that rates will return to near zero. And as always when it comes to interest rates, it’s best not to count your chickens until they’re hatched.”

US Federal Reserve Chairman Jerome Powell last night opened the door to lowering interest rates in the United States as early as next month.

Powell said the US economy is moving closer to a rate cut, but cautioned that this is not yet the case.

The US central bank has voted unanimously to keep its key interest rate within a range of 5.25 percent to 5.5 percent, a level it has held since July last year.

Neil Birrell, Chief Investment Officer at Premier Miton Investors:

‘The UK’s falling interest rates have finally arrived. The Bank of England has moved from inflation concerns to growth concerns, although they will be cautious about further cuts and can’t let the bond market expect too much too soon.

“But it is an important step, given that only the US has so far failed to join the global rate-cutting party. We could see financial markets continue to reflect the turn in the cycle, at an aggregate level, but probably more so across asset classes.”

Shell’s profit fell by almost a fifth in the second quarter but beat expectations despite weaker refining margins and oil and gas trading.

The energy giant saw its profit fall 19 percent from $7.7 billion to $6.3 billion between the first and second quarters, beating analyst estimates of $6 billion.

It is the third quarter in a row that Shell has beaten City’s estimates.

Indriatti van Hien, fund manager at Henderson Small Companies Investment Trust:

‘The Bank of England’s decision today to cut interest rates by 25 basis points to 5% is good news for the UK economy and the stock market.

‘While nominal in absolute terms, it is an important milestone in the direction monetary policy is heading and should add to the already growing momentum in UK business and consumer confidence.’

Next has raised its full-year profit forecast after the retailer’s first-half revenue beat expectations, driven by increased online demand abroad.

The FTSE 100-listed giant saw full-price sales rise 4.4 percent in the first half of the year, beating forecasts of 2.5 percent. Second-quarter sales were £42 million higher than expected.

Next told investors it expected a 0.3 percent decline in full-price sales in the second quarter due to “exceptionally favourable” trading conditions over the summer.

Jill Mackay, savings specialist at Scottish Friendly:

‘The base rate peaked just under a year ago, rising rapidly in 2022 and 2023 to curb inflation. The cut is good news for households under mortgage pressure, but bad news for savers who see their interest income fall.

‘Despite the fact that interest rates have risen like a rocket, it is likely that they will now fall like a feather. With the economy growing better than expected, wages rising and employment still relatively robust, the bank will be keen to adopt a soft-soft approach to avoid reigniting inflation. Where its neutral rate lies is an open question, but it will take time to get there.’

Barclays’ profit fell in the first half of the year as a strong performance from its investment banking division failed to offset a decline in its core UK business.

The FTSE 100 lender’s pre-tax profit fell 9 percent to £4.2 billion in the first half of the year, beating estimates of £3.8 billion but down from £4.6 billion a year ago.

Group revenues were flat at £6.3bn in the second quarter, beating expectations of £6.16bn. Total half-year profit came to £13.3bn, down 2 per cent year-on-year.

The Bank of England has cut its base rate to 5 percent. The bank’s Monetary Policy Committee voted to cut the rate by 25 basis points to 5 percent by a margin of 5 to 4.