FTSE 100 election rally peters out but pound gains

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(Close): UK shares dipped in late afternoon trading on Monday, having been in positive territory for most of the day.

After jumping more than 2% on Friday following the Conservatives' election victory, the FTSE 100 closed 16.97 points lower at 7,029.85.

Mining shares were lifted by news of an interest rate cut in China, the world's largest importer of raw materials.

Shares in Glencore were up 1.1%, while Anglo American was also 1.1% higher.

"This time miners are in the ascendant, after China used one of the tools at its command and cut interest rates," said Chris Beauchamp, senior market analyst at IG.

"However, the cut is not enough to spark a major rally, and with the euphoria of Friday giving way to concerns relating to Scotland and the UK's place in the EU, we could see technical and fundamental factors combine to keep the FTSE 100 from breaking through the key 7,100 area yet again."

Royal Mail was the top riser in the FTSE 100, climbing 3.9% to 497.60p. Its shares were boosted by the news that Whistl, the company that ran mail delivery contracts in London, Liverpool and Manchester, had suspended all services.

On the currency markets, the pound continued to strengthen. It rose 0.85% against the dollar to $1.5579, and was up 1.4%, nearly two euro cents, against the euro at €1.3971.

The Bank of England kept UK interest rates on hold at 0.5% following its latest meeting, as expected.

Attention now switches to the Bank's quarterly inflation report on Wednesday, where analysts will be looking for clues as to when the Bank might raise interest rates.