The much scrutinised Bank of England’s interest rate hike by half a point to five percentage points today, piled the pressure on London markets.
London opened far lower in anticipation of the rate hike and continued in the red following the announcement, which marked the 13th straight rise from the bank and took interest rates to their highest levels in 15 years.
The capital’s premier index closed down 0.76 per cent, in a day which saw nearly every stock on the FTSE 100 in the red when markets awakened.
Despite resilience in the morning, the more domestically-focused mid-cap FTSE 250 index tumbled after midday, finishing down 1.25 per cent.
Challenger bank Virgin Money UK was the biggest faller, dropping 7.53 per cent, with property developer British Land Co also closing down 6.23 per cent after a tough day.
On the FTSE 100, big fallers included banks, retailers and utility groups, with telecommunications firm Artiel Africa topping the list after a torrid day, down 5.86 per cent. Tesco followed just behind, down 3.71 per cent.
It comes after the Bank of England and its embattled chief Andrew Bailey raised interest rates to levels far higher than had been expected at midday, in an attempt to hold down persistently sticky inflation.
Data from the Office for National Statistics (ONS) released yesterday showed inflation was still at 8.7 per cent last month, far higher than City expectations.
Across the pond, Fed chair Jerome Powell also signalled yesterday that more rate hikes could be on the horizon in the states, piling yet more pressure on markets.
Top FTSE 100 risers included chemicals firm Croda International, up 2.52 per cent but still well behind food delivery tech firm Ocado.
Ocado’s shares were as high as 33.58 per cent in early afternoon trading and closed up 32.05 per cent following reports in the Times about a potential bid interest for the company from Amazon.
London ‘looking pretty sickly’
Danni Hewson, head of financial analysis at AJ Bell, said this morning that the FTSE 100 was “looking pretty sickly… as it awaited an interest rate hike from the Bank of England” and there was little positive movement following the midday hike.
“For markets the cure of higher interest rates could be worse than the disease of high inflation amid speculation a 50-basis point rise could be in the offing. Hawkish rhetoric from the US Federal Reserve is also doing little for sentiment,” Hewson said.
“Inflation is proving more stubborn than expected in the UK and the brains trust in Threadneedle Street seem to have little answer other than employing the blunt instrument of rate hikes to try and bring things under control.”