Central Bank rate hikes drag London’s FTSE 100 lower

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Thursday, July 14, 2022 10:07 am

The capital’s leading FTSE 100 index fell 0.69 percent to 7,107.06 points, while the domestically focused mid-cap FTSE 250 index, which is more focused on the health of the UK economy, fell 0.15 percent fell to 18,682.81 points

London markets were tame today as investors assessed whether the Bank of England will accelerate rate hikes in response to the economy proving more resilient than expected.

The capital’s leading FTSE 100 index fell 0.69 percent to 7,107.06 points, while the domestically focused mid-cap FTSE 250 index, which is more focused on the health of the UK economy, fell 0.15 percent fell to 18,682.81 points.

Stronger-than-expected GDP figures released yesterday by the Office for National Statistics pushed bets on a 50 basis point rate hike by the bank at its next meeting on August 4 for the first time since independence 25 years ago.

The economy grew 0.5 percent in May, much better than the city’s expectations that manufacturing would stagnate that month.

The data led analysts to believe the UK might be able to absorb higher interest rates without slipping into a recession known as a ‘soft landing’.

Industrial giants led the FTSE 100 lower, driven by a fall in commodity prices on fears that demand could contract amid the global economic slowdown.

Miners Rio Tinto, Fresnillo and Anglo American all lost more than 1.3 percent.

Oil prices fell, with global benchmarks WTI Crude and Brent Crude each down around two percent to trade below $100 a barrel.

The pound continued to slide against the dollar, weighed down by late-breaking US inflationary pressures released yesterday that cemented bets of a 75 basis-point rate hike by the Federal Reserve for the second straight meeting later this month.

Some even believe that Fed Chair Jerome Powell and company will sign a historic full percentage point hike to dampen inflation, which is at a 40-year high of 9.1 percent.

Canada’s central bank hiked interest rates by the same amount yesterday, while New Zealand’s central bank hiked borrowing costs by 50 basis points.

Sterling weakened about 0.4 percent to $1.1846.

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