Markets Edge Higher; Aviva Slides Lower

THURSDAY MARKET UPDATE: Shares in the insurance company Aviva fell by 12.5% after the company slashed its dividend

Alanna Petroff 7 March, 2013 | 6:28PM
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It was a bumpy day in the markets, but the benchmark FTSE 100 index and the mid-cap FTSE 250 index each managed to eke out a 0.2% gain by the close of the trading day. The FTSE 100 edged up by 12 points to close at a fresh five-year-high of 6,439. The FTSE 250 added 30 points and closed at 13,953.

Market Winners and Losers

There was a clear leader and a clear loser on the FTSE 100 on Thursday. Aggreko (AGK) shares rallied by nearly 10.5% after the power provider announced it would hike its dividend. Meanwhile Aviva (AV.) shares plunged by 12.5% after the company slashed its dividend. Aviva cut its final dividend by 27%.

This unexpected Aviva cut comes just after RSA Insurance Group (RSA) also chopped its dividend pay-out. Investors reacted to the news from each company by selling off shares. Investors prize these companies, in part, because of their generous dividend pay-outs.

Central Bank Moves

Central banks also took centre stage on Thursday, with both the Bank of England (BoE) and the European Central Bank (ECB) announcing their latest monetary policy decisions.

The Bank of England's Monetary Policy Committee opted to keep interest rates on hold at 0.5% and rejected calls to increase its quantitative easing programme.

"Against a more uncertain background than usual, the MPC maintained the stance of policy today, holding the Bank rate at 0.5% and the asset purchase target steady at £375 billion. Doubts over the recovery, plus the fact that three members--including Sir Mervyn King--backed more QE last month, had led to some speculation that the committee would restart asset purchases today. Instead the announcement resulted in a modest rally in sterling. The committee chose not to make an accompanying statement this time, but the minutes of the meeting will be released on 20 March," said Investec economist Philip Shaw.

In Europe, the ECB kept eurozone interest rates unchanged at 0.75%.

To see the top winners and losers on the FTSE 100 each day, check out Morningstar's Heat Map.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Aviva PLC457.20 GBX-0.31Rating

About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.

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