London stocks sag after shock rate hike
The FTSE 100 fell 0.76%, down 57.15 points to 7,502.03, with banks and housebuilders among the biggest fallers.
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Your support makes all the difference.London’s FTSE 100 has fallen to a three-week low after a surprise sharp hike in UK interest rates stoked fears of a looming mortgage crisis.
Banks and housebuilders were among the stocks dragging on the index as mortgage borrowers are set to feel more pain.
The Bank of England opted to raise rates by 0.5 percentage points to 5%, surprising economists who were expecting a smaller increase.
The Bank’s governor, Andrew Bailey, said it has to deal with too-high inflation. He also insisted the Bank was not trying to bring about a recession, but that it will “do what is necessary to bring inflation to target”.
But the prospect of a recession being a side-effect of curbing inflation dampened investor sentiment.
Everything is now subordinate to the task of getting inflation under control, with heightened recession risk accepted as a necessary evil
The FTSE 100 fell 0.76%, down 57.15 points to 7,502.03, with the likes of Barclays, HSBC, NatWest, Persimmon and Beazley all recording losses on Thursday.
Chris Beauchamp, chief market analyst for IG, said: “The FTSE 100 has fallen to a three-week low today as investors worry about the impact of more rate hikes on the UK economy.
“The losses are even more pronounced on the mid-cap FTSE 250 due to its UK exposure.
“A recession in the UK now seems an inevitability with the Bank of England committed to more rate hikes, and at a faster pace.
“Everything is now subordinate to the task of getting inflation under control, with heightened recession risk accepted as a necessary evil.”
The pound slipped back after edging higher immediately following the bigger-than-expected rate rise. By the time European markets closed, the pound was down 0.2% against the US dollar to 1.2748, but up by 0.2% against the euro to 1.1638.
Stock markets elsewhere in Europe closed in the red. Germany’s Dax was down 0.22% and France’s Cac 40 fell 0.79%.
It was a slower start to trading in the US, with the S&P 500 flat and Down Jones dipping by 0.2%.
In company news, Ocado was the day’s big riser after a report that the business might be attracting takeover interest after months of its stock languishing.
The business declined to comment on a report in The Times which said it might be in the crosshairs of more than one suitor from the US, but the coverage was enough to spark excitement among investors.
Shares in Ocado soared by nearly a third, climbing 137.8p to 567.8p.
Hornby shares hit the buffers on Wednesday after the continued pressure on consumer budgets dragged the model train maker to an annual loss.
The company said it posted a £5.9 million loss for the year to March 31 after Christmas trading fell short of expectations.
Hornby shares plunged by 15.6%, closing 3.5p lower to 19p.
Premier Inn owner Whitbread dipped in value despite recording a rise in hotel booking over the latest quarter.
Whitbread said that its accommodation business in the UK saw sales jump 18% over the period when compared to last year, amid a strong showing in London around the Coronation of King Charles. Shares were 37p lower to 3,355p.
The biggest risers in the FTSE 100 were Ocado Group, up 137.8p at 567.8p, Croda International, up 134p at 5,452p, JD Sports Fashion, down 3.35p at 149.75p, B&M European Value Retail, up 7.6p at 575.6p, and Ashtead, up 64p at 5,442p.
The biggest fallers of the day were Airtel Africa, down 6.2p at 113.2p, Tesco, down 9.7p at 248.9p, United Utilities, down 35.5p at 1,001p, DS Smith, down 9.8p at 280.4p, and Auto Trader, down 20.4p at 589.2p.