London’s main indexes closed lower on Thursday as investors feared further rate hikes and yet another report pointed to a gloomy future for the UKs’ housing market.
The capital’s premier index fell 0.32 per cent to 7,599.74 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, slipped 0.24 per cent to 19,107.07 points.
Markets were lower after the Canadian central bank hiked interest rates this week after skipping last time around. It followed a rate hike from the Australian central bank earlier this week.
“Canada and Australia don’t often have a central role in moving the markets but the decision by both countries’ central banks to resume rate hikes this week has reverberated through the financial system and helped stoke fears about sticky inflation,” says AJ Bell investment director Russ Mould.
“If the Federal Reserve follows the lead of its Australian and Canadian counterparts then this could be badly undermined and the next Fed decision is now just a week away,” he continued.
Housebuilders will continue to be in focus after a pessimistic report from the Royal Institution of Chartered Surveyors (RICS) this morning.
The group warned that further rate rises would put renewed pressure on the market in the months ahead, although there was a slight recovery in sales in May.
RICS senior economist Tarrant Parsons says “it seems storm clouds are gather(ing), with the UK’s stubbornly high inflation likely undermining the recent improvement in activity”.
He said the high inflation rate will force “the Bank of England to take further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand.”
Derren Nathan, head of equity research at Hargreaves Lansdown commented: ‘’The monthly report by the RICS mirrors the gloom seen in yesterday’s house price data by Halifax although there were a few glimmers of hope.”
The FTSE’s housebuilders fell after the report. Barratt was down 0.7 per cent, Persimmon 0.7 per cent and Taylor Wimpey 1.4 per cent.
On the FTSE 250, property developer Crest Nicholson struggled amid “rapidly” falling consumer confidence, with its revenue falling by more than a fifth. It closed 7.4 per cent lower.
The decline reflected economic uncertainty and softer demand for homes weighing on the housing market, the company said. The housebuilder called for government support as rising interest rates continue to weigh on the sector.
Elsewhere on the midcap index, Wizz Air fell 4.2 per cent as the budget airline remained lossmaking. It has struggled with soaring fuel costs recently, particularly as it did not hedge against price rises initially.