Markets respond to Bank of England announcements

Troubles in the eurozone are now coming into full effect in the UK, but the Bank of England has not provided any further indication if and when it is to provide more economic stimulus.

"We are navigating rough waters and storm clouds continue to roll in from the Euro area," governor Sir Mervyn King told a news conference, while presenting the institution's latest forecasts.

He added that although output has contracted in each of the past three quarters, the underlying data is probably better than the headlines suggest.

If the Bank is to provide further intervention, Sir Mervyn hinted that it would come via more quantitative easing rather than cutting interest rates, which are already at a record low 0.5 per cent.

His comments saw markets prepare for the action as sterling gained slightly and gilt futures were buoyed, but investors will be concerned that the latest forecast of UK's growth fell from 0.8 per cent to just over zero.