BUSINESS LIVE: BoE cuts interest rates; Rolls-Royce shares soar to all-time high; Next profits set to near £1bn

Rio Tinto has rejected calls from an investor to ditch its UK listing and concentrate on Australia – in a boost for the London Stock Exchange.

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

Rolls-Royce has restarted dividend payouts and lifted full-year guidance, after chief executive ‘Turbo’ Tufan Erginbilgic’s profitability drive showed progress in the first half.

The FTSE 100 aeroplane engine maker posted an underlying operating profit of more than £1.1billion for the first six months of the year, up 70.7 per cent from £673million last year.

Erginbilgic has implemented a strict cost-cutting programme – which is expected to slash spending by £200million a year by the end of 2025 – and has paid down some of Rolls’ substantial debt pile.

Laith Khalaf, head of investment analysis at AJ Bell:

‘As for where interest rates go from here, there are mixed messages in the Bank’s latest statement.

‘The fact four out of nine members wanted to keep rates on hold shows there is still a considerable amount of hawkishness in the interest rate committee.

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

‘It’s important to bear in mind that today’s interest rates aren’t remotely unusual by historic standards, and the extreme shock felt by millions of homeowners as they remortgaged is due to the unnatural monetary conditions which prevailed in the previous decade of ultra-loose monetary policy.

‘Even if more rate cuts are forthcoming, no-one should be under any illusion that rates are going back to near zero. And, as ever when it comes to interest rates, it’s best not to count your chickens until they’re hatched.’

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

Powell said the US economy was getting closer to warranting a rate cut but warned it wasn’t there yet.

The American central bank voted unanimously to leave their benchmark interest rate in a range of 5.25 per cent to 5.5 per cent – a level they have maintained since last July.

Neil Birrell, chief investment officer at Premier Miton Investors:

‘Falling UK interest rates have arrived at last. The Bank of England has moved from worrying about inflation to worrying about economic growth, although they are bound to be cautious about further cuts and can’t lead the bond market to expect too much too soon.

‘But, it is an important move, with only the US not joining the global rate cutting party to date. We could see financial markets further reflect the turn in the cycle, at aggregate level, but probably more so within asset classes.’

Shell profits slumped by almost a fifth in the second quarter, but beat estimates even as refining margins and oil and gas trading weakened.

The energy giant saw a 19 per cent drop in profit from $7.7billion to $6.3billion between the first and second quarter, beating analyst estimates of $6billion.

It marks the third consecutive quarter that Shell has beaten City estimates.

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

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

‘Whilst nominal in absolute terms it is a meaningful milestone in the direction of travel for monetary policy should add to the already building momentum in UK business and consumer confidence.’

Next has upgraded full-year profit guidance after the retailer’s sales smashed expectations in the first half, driven by a surge in overseas online demand.

The FTSE 100-listed high street giant saw full-price sales jump 4.4 per cent in the first half of the year, beating guidance of 2.5 per cent, after securing £42million more in revenues than forecast in the second quarter.

Next told investors it had planned for a 0.3 per cent full-price sales dip in the second quarter, owing to ‘exceptionally favourable’ trading conditions last summer.

Jill Mackay, savings specialist at Scottish Friendly:

‘The peak of the base rate lasted just shy of one year, having risen meteorically in 2022 and 2023 in order to quell inflation. The cut is good news for households under mortgage pressure but will be bad news for savers who will begin to see their interest earnings slashed.

‘Despite having risen like a rocket, it is likely that rates 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 take a softly-softly approach in order to not reignite inflation. Where its neutral rate lies is an open question, but it will take time to arrive at.’

Barclays profits slumped in the fist half, as a strong performance in its investment banking division failed to offset a decline in its core UK businesses.

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

Group income was flat at £6.3billion in the second quarter, beating expectations of £6.16billion and bringing total half-year income to £13.3billion, down 2 per cent year-on-year.

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