London close: Stocks falter after BoE's 50 basis point hike

(Sharecast News) - London stocks closed significantly lower on Thursday following the Bank of England's decision to hike interest rates by 50 basis points. The FTSE 100 dipped 0.76% to close at 7,502.03, while the FTSE 250 suffered a more substantial fall, finishing down 1.31% at 18,327.97.

In currencies, sterling slipped 0.19% against the dollar to last trade at $1.2746, while it appreciated 0.11% on the euro to change hands at €1.1635.

"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," said IG chief market analyst Chris Beauchamp.

"The losses are even more pronounced on the mid-cap FTSE 250 due to its UK exposure."

Beauchamp said a recession in the UK now seemed "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."

Flurry of rate hikes includes surge in UK Bank Rate

On the economic front, the Bank of England (BoE) announced a significant increase in interest rates by half a percentage point earlier in the day.

According to the BoE's monetary policy statement, the current market-implied path for the Bank Rate for the next three years was previously estimated at just over 4%, but it now averaged around 5.5%.

Concurrently, mortgage rates had seen a notable surge, and the strength of sterling had also grown.

Furthermore, average weekly earnings unexpectedly rose by 7.6% over the three months to April, up half a percentage point from the May inflation report.

"The [Monetary Policy Committee's] remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework," the Bank of England said.

"The framework recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances.

"Monetary policy will ensure that CPI inflation returns to the 2% target sustainably in the medium term."

On the continent, the Swiss National Bank (SNB) also took action against inflation by raising its policy rate for the fifth time, this time by 0.25 percentage points, bringing it to 1.75%.

While it marked the smallest increase in the current rate-setting cycle, it followed two significant hikes of 50 basis points in March and December, and two more substantial hikes of 75 basis points in June and September last year.

In a similar move, Norway's central bank, Norges Bank, also ramped up its fight against inflation in announcing a hefty 50 basis point increase to its rate, bringing it to 3.75%.

It marked the 11th rate hike since September 2021, with the central bank also hinting at further increases in the future, with its current outlook implying a likely rate hike in August.

Across the pond, the US labour market exhibited little change in terms of tightness last week.

Data from the Department of Labor showed that the number of initial unemployment claims for the week ended 17 June, adjusted for seasonal fluctuations, remained stable at 264,000.

While the count for the previous week was slightly adjusted upwards by 2,000, the four-week moving average rose by 8,500, settling at 255,750.

Ocado Group surges amid takeover speculation, ex-divs prove a drag

Ex-dividend stocks were the feature among the fallers on London's equity markets, with Airtel Africa dropping by 5.19% and British Land depreciating 6.32%.

United Utilities Group suffered a decrease of 3.42%, while 3i Group and Mitie Group faced declines of 2.55% and 2.44% respectively.

Tate & Lyle lost 3.03%, and DiscoverIE Group slipped by a lesser margin of 0.9%.

Elsewhere, Premier Inn owner Whitbread fell 1.09% despite the company announcing a substantial increase in first-quarter sales, maintaining that consumer demand within the UK remained robust.

On the upside, online grocer Ocado Group surged of 32.05% amid speculation that it could be a potential takeover target for e-commerce giant Amazon.com.

"The shares have been about as flat as an open bottle of lemonade since the pandemic but third parties, including reportedly Amazon, may still see value in the brand, technology and infrastructure," quipped Danni Hewson, head of financial analysis at AJ Bell.

"Ocado's hopes of becoming an online groceries partner to businesses across the globe has only had limited success and shareholders may be open to a bidder putting them out of their misery."

In other good news, NCC Group rallied 3.45% following the cybersecurity specialist's appointment of a new chief financial officer.

The firm's management also expressed their confidence in the group's ability to achieve double-digit revenue growth and mid-teen operating profit margins from the 2025 financial year onwards.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,502.03 -0.76% FTSE 250 (MCX) 18,327.97 -1.31% techMARK (TASX) 4,482.88 -0.90%

FTSE 100 - Risers

Ocado Group (OCDO) 567.80p 32.05% Croda International (CRDA) 5,452.00p 2.52% JD Sports Fashion (JD.) 149.75p 2.29% B&M European Value Retail S.A. (DI) (BME) 575.60p 1.34% Ashtead Group (AHT) 5,442.00p 1.19% Antofagasta (ANTO) 1,493.00p 1.19% Halma (HLMA) 2,236.00p 0.95% Coca-Cola HBC AG (CDI) (CCH) 2,340.00p 0.86% Diageo (DGE) 3,330.50p 0.76% Haleon (HLN) 325.00p 0.73%

FTSE 100 - Fallers

Airtel Africa (AAF) 113.20p -5.19% Tesco (TSCO) 248.90p -3.75% United Utilities Group (UU.) 1,001.00p -3.42% Smith (DS) (SMDS) 280.40p -3.38% Auto Trader Group (AUTO) 589.20p -3.35% Barclays (BARC) 146.96p -2.97% Abrdn (ABDN) 207.30p -2.86% Persimmon (PSN) 1,103.50p -2.69% 3i Group (III) 1,907.00p -2.55% Fresnillo (FRES) 609.20p -2.43%

FTSE 250 - Risers

NCC Group (NCC) 90.00p 3.45% Aston Martin Lagonda Global Holdings (AML) 332.80p 3.03% Darktrace (DARK) 328.30p 2.69% Ferrexpo (FXPO) 89.55p 2.64% Volution Group (FAN) 356.80p 1.88% Carnival (CCL) 1,120.50p 1.77% Hilton Food Group (HFG) 655.00p 1.24% FirstGroup (FGP) 142.70p 1.21% Hill and Smith (HILS) 1,528.00p 1.06% Allianz Technology Trust (ATT) 258.50p 0.98%

FTSE 250 - Fallers

Virgin Money UK (VMUK) 142.40p -7.63% British Land Company (BLND) 308.40p -6.32% North Atlantic Smaller Companies Inv Trust (NAS) 3,560.00p -5.32% Babcock International Group (BAB) 290.20p -5.30% Trainline (TRN) 241.60p -5.25% Marshalls (MSLH) 249.20p -5.03% Future (FUTR) 675.50p -4.46% Molten Ventures (GROW) 246.40p -4.12% Just Group (JUST) 78.00p -4.06% Close Brothers Group (CBG) 863.50p -4.00%