LONDON (Reuters) - Britain’s top shares index rose on Tuesday, lifted by new measures from the Bank of England to prop up the economy in the wake of the country’s vote to leave the European Union.
Nevertheless, in spite of the overall rise for the market, the impact of the “Brexit” vote to quit the EU could be seen in the property and housebuilding sectors, where shares slumped.
The blue-chip FTSE 100 index initially fell by some 0.6 percent but then rose on the back of the Bank of England’s new measures and closed 0.4 percent higher at 6,545.37 points.
The British stock market also outperformed exchanges elsewhere in Europe, with the pan-European STOXX 600 down 1.7 percent while Germany’s DAX declined 1.8 percent.
The Bank of England took steps so that British banks keep lending and insurers do not dump corporate bonds in what it said was a “challenging” period likely to follow the Brexit vote.
The latest measures announced by BoE Governor Mark Carney pushed down sterling, which in turn gave a lift to the FTSE 100, since a weaker pound can help exports from the index’s international companies.
“The FTSE has been bolstered by the Bank of England’s latest set of measures, which should help to counter the negative effects of Brexit,” said Securequity sales trader Jawaid Afsar.
However, property and housebuilding shares slumped.
Real estate investment trusts fell after Standard Life Investments suspended trading in a real estate fund, and housebuilding stocks dropped on worries about the sector’s outlook after the Brexit vote.
That move was echoed on Tuesday by Prudential Plc’s M&G division, which also suspended trading in its 4.4 billion pound ($5.7 billion) UK property fund.
Standard Life Investments Property Income Trust slumped 9.4 percent, having earlier touched its lowest level since late 2013, while Land Securities, British Land and Intu Properties also lost ground.
Housebuilder Barratt Development dropped 9.8 percent while rival Persimmon fell 7.2 percent, despite Persimmon reporting higher first-half revenues.
Shares in Royal Bank of Scotland and Lloyds, which are exposed to the UK property sector, also fell.
“The situation in the beleaguered property and banking sectors remains dire,” said Spreadex analyst Connor Campbell.
While the FTSE 100 has partially recovered and is up about 3 percent since June 23, it remains down by about 10 percent in U.S. dollar terms, as the slump in sterling has reduced the dollar value of the British market.
Additional reporting by Atul Prakash; Editing by Keith Weir