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Markets tumble into red as interest rate hikes increase economic worries

·3-min read
The Bank of England in the City of London (Yui Mok/PA) (PA Archive)
The Bank of England in the City of London (Yui Mok/PA) (PA Archive)

Markets in London and across Europe slid on Thursday as a raft of interest rate rises added further to the economic gloom facing traders.

The Bank of England was the latest central bank to launch a major interest rate hike on Thursday, as it lifted rates to 2.25%, representing an almost 14-year high.

The increase was lower than some predicted but came after the markets were already shaken by a 0.75% percentage point rate increase by the Fed late on Wednesday and an intervention by Japan’s central bank to support the plunge in the yen.

The FTSE 100 ended the day down 78.12 points, or 1.08%, at 7,159.62.

Volatility has come from a variety of sources

Joshua Mahoney, IG

Joshua Mahoney, senior market analyst at IG, said: “Today has seen another bout of downside for stock markets throughout Europe and the US, with geopolitical and economic concerns providing a drag on risk assets once again.

“On a week dominated by central banks, it was always going to be difficult to envisage a scenario where traders emerge with a positive outlook.

“Volatility has come from a variety of sources, with the aftereffects of yesterday’s Federal Open Monetary Committee meeting coming into play alongside a Russian nuclear war warning, Bank of Japan intervention and a Bank of England rate decision.”

Elsewhere in Europe, the other main indexes started the day firmly lower as sentiment was significantly dented by the Wednesday downturn in the US markets.

The German Dax declined 1.78% by the end of the session and the French Cac finished 1.79% lower.

In the US, the markets opened slightly lower but sentiment had clearly softened, even despite higher weekly jobless claim figures.

Meanwhile, sterling held fairly steady despite the jump in interest rates, recovering somewhat from intra-day lows.

The pound was down 0.07% against the dollar at 1.126 but was 0.10% higher against the euro at 1.146 at the close.

In company news, JD Sports fell in value after profits tumbled by nearly a fifth as bosses cautioned over inflation and supply chain disruption affecting trading over the rest of the year.

The sportswear chain posted an 18% drop in pre-tax profits to £298.3 million for the six months to July 30.

Shares in the company declined by 10.4p to 113.45p as a result.

Elsewhere, soap maker PZ Cussons made gains after the group said it was able to offset price rises by pushing through price changes and cost initiatives throughout the year.

Shares moved 4p higher to 199.2p as it held firm on trading guidance for the current year.

Aston Martin shares slid by 15.9p to 149.2p after renewed concerns that the luxury car manufacturer may have to raise further capital.

The price of oil witnessed a modest improvement as it benefited from a slight softening in the dollar.

The price of Brent crude oil increased by 1.1% to 90.82 US dollars per barrel when the London markets closed.

The biggest risers on the FTSE 100 were CocaCola HBC, up 44p to 1,944.5p, Rio Tinto, up 108p to 4828p, Kingfisher, up 3p to 240.5p, Aveva Group, up 35p to 3,137p, and Anglo American, up 24p to 2,838p.

The biggest fallers on the FTSE 100 were JD Sports, down 10.4p to 113.45p, Ashtead, down 306p to 3907p, Intermediate Capital Group, down 83p to 1,088.5p, Hargreaves Lansdown, down 59p to 832.4p, and Dechra Pharmaceuticals, down 182p to 2,764p.