The FTSE 100 fell on Thursday after the Bank of England raised rates and the market digested a terrible set of results from Meta.
The FTSE 100 was trading down by 0.35% at 7,555 shortly after midday trade in London after accelerating declines following the decision by the Bank of England to increase rates to 0.5%.
The Bank of England raised rates for the second month row having hiked rates for the first time since the beginning of the pandemic in December. As well as sending the FTSE 100 further into negative territory, the rate hike saw the pound rally against the dollar, before fading into the afternoon.
Although sterling traders may have benefited from the news, the decision to hike rates comes at a time UK households are facing a cost of living crisis with soaring energy bills, food inflation and tax increases.
“Policy makers at the Bank of England have poured another dash of cold water over the economy in a bid to stop it breaking out in even more of a sweat,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
“This cooling attempt had largely been priced in by the financial markets given that inflation was running so hot, but some policy makers clearly felt a much bigger splash was needed to get try and get prices under control. Four members of the Monetary Policy Committee wanted rates to rise to 0.75%, a sign that inflation is fast turning from a niggling headache to a debilitating migraine.”
Sectors reliant on the health of the UK consumer suffered in the wake of the announcement with shares in housebuilders and retailers feeling the pinch.
The UK banks cheered the news with Lloyds and Barclays surging 2.5% and 2.4% respectively.
Meta
Markets started off the day with a negative tone after Facebook owner Meta crashed 25% as the social media giant missed earnings estimates.
“It’s tough for any firm to stay at the top: either customers get bored of you, the competition catches up or the regulator sticks in their nose and at Facebook it may just be a case of all three, as growth in daily average user stalls and revenue increases begin to slow,” said AJ Bell Investment Director Russ Mould.
“Facebook may also be yet another firm whose business model is perfectly-adapted to helping people cope with the pandemic and lockdowns but may see fresh interest wane as commuters return to offices and consumers look to get out and about again.”
Meta was a significant drag on the tech-heavy NASDAQ which declined over 2% in the pre-market and revived fears over the technology sector denting market sentiment.
Investors again used the Scottish Mortgage Investment Trust as a proxy for sentiment around the US tech sector and sent their shares down 3.5%.