London’s FTSE 100 slipped today as investors fretted over central banks keeping interest rates higher for longer.
The capital’s premier index dropped 0.38 per cent to 7,471.68 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.77 per cent to 18,270.73 points.
Losses in the City are likely to have been driven by risk sentiment being knocked by remarks from the world’s top central bankers yesterday that signalled more rate rises are on the way.
The chiefs of the Bank of England, US Federal Reserve and European Central Bank yesterday said borrowing costs are likely to stay restrictive for some time to ensure inflation doesn’t hang around.
Jeremy Powell, the Fed chair, said policy “may not be restrictive enough and it has not been restrictive for long enough”.
Bank of England governor Bailey echoed that sentiment, as did ECB president Christine Lagarde.
Higher borrowing costs often knock stocks by making it more attractive to hold bonds and choking economic activity.
Pound sterling clocked its worst day against the US dollar in a month yesterday, shedding 0.8 per cent. Typically, bets on more rate rises should strengthen a currency.
Neil Wilson, chief market analyst at Finalto, said: “Sterling took a beating worse than the England bowlers yesterday – sense that stagflation is not good for the pound in the wake of last week’s 50 basis point hike is clear enough.”
Sterling shed around 0.2 per cent against the dollar today.
Interest rate sensitive stocks led losses on the FTSE 100 today. Housebuilder Persimmon bled 2.21 per cent, while sector peer Taylor Wimpey slipped a shade over one per cent. Barratt Developments and Berkeley Group were also lower.
Figures from the Bank of England today revealed around 50,500 mortgages were approved in May, the month before the meat of the rise in mortgage rates, leading experts to warn home loans could fall sharply in the coming months.
Oil prices were mostly flat, arresting a prolonged slide caused by concerns about the ability of the global economy to withstand more rate rises.