FTSE 100 rallies as Philip Hammond acts to calm markets

The stock market rose to a fresh 11-month high today as the new Chancellor, Philip Hammond, acted quickly to reassure financial markets he planned no shock moves on the economy.

“Markets do need signals of reassurance, they need to know that we will do whatever is necessary to keep the economy on track,” Hammond said.

The FTSE 100 index of blue-chip shares rose 54.31 points to 6724.71, having reversed an early fall of 30 points.

It now stands at its highest level since August last year and has risen almost 600 points from its close on June 24, the day of the Brexit result.

Hammond met Governor Mark Carney this morning, just hours before the Bank of England was expected to cut interest rates to an all-time low.

“I think the Governor is doing an excellent job,” said Hammond.

Financial markets were signalling an 80% chance that the monetary policy committee would cut rates for the first time in seven years and four months from 0.5% to 0.25% in a bid to counter the damage done to the economy by Brexit.

Hammond added that there was “no room for complacency over the City of London” and that the UK “must ensure access to the EU single market for financial services.”

But he also said that he expected the City to be “highly resilient in the short term.”

Bankers and economists reacted positively to the new Prime Minister Theresa May’s initial Cabinet appointments and the likely course they set for Brexit.

“Starting to discuss the divorce terms and the new terms of trade as soon as possible in a constructive rather than confrontational way could support a quicker economic recovery as a reduction in uncertainty can mitigate the downside risks to business investment and hiring,” said Kallum Pickering, senior UK economist at Berenberg.

Gilts, which had hit new record low yields in the wake of the referendum, actually ticked slightly higher ahead of the interest rate decision.