Some dealers believe that the Abbey's action could herald a slight easing of interest rates in the short-term, although many interpreted the move as a response to the weak housing market and an attempt to increase market share.
By the close of trade on Friday the FT-SE 100 index had regained much of its lost ground, re-establishing a position ahead of the 3,500 mark at 3,509.4.
However, over the week as a whole the index fell 15.5 points, reflecting worries about the possibility of poor profits releases from UK companies.
There is not expected to be much reaction to a 'no change' monetary meeting between the Chancellor and the Governor of the Bank of England this Thursday, with the vast majority of City traders expecting interest rates to remain at 6.75%.
Results due this week:
It is a bumper week for company results, and the ones that the market will focus upon are:
Glaxo-Wellcome: The world's biggest drugs company publishes interim results on Thursday. There is expected to be some slowdown in sales growth and major jobs cuts are likely following Glaxo's £9bn take-over of Wellcome.
British Gas: Second quarter results are published on Thursday and a healthy rise in shareholder dividends is expected.
Blue Circle: The UK's biggest cement manufacturer is expected to announce healthy half-year profits following market share growth. However, there is expected to be a warning about future profits as the UK construction industry moves back into recession.