The FTSE 100 was firmly in the red on Wednesday as markets reacted to a higher-than-expected UK CPI reading which raised worries about additional rate hikes by the Bank of England.
A sense of complacency had crept into UK equities, with expectations of additional interest rate hikes this year diminishing. Today’s news will have been a major disappointment for investors hoping for a dovish end to 2023.
This disappointment played out in UK stocks on Wednesday, with the FTSE 100 down at 0.8% at the time of writing. The sell-off was broad and UK-facing sectors were the most heavily hit.
“Higher than expected UK inflation data has put the market in a spin, sending shares in housebuilders, airlines, banks and utilities into a downward trend. Sticky inflation strengthens the argument for further interest rate hikes, which in turn adds to pressures for consumers and businesses,” said Russ Mould, investment director at AJ Bell.
“Higher rates would pile on the pressure for the property market as the cost of borrowing goes up, explaining why the likes of Barratt Developments, Taylor Wimpey and Howden Joinery were the top three fallers on the FTSE 100. Banks would normally benefit from higher interest rates but the market seems to be worried that further hikes could increase bad debts.”
Taylor Wimpey and Barratt Developments were both down 3.8% at the time of writing, while Howden Joinery dumped 3.4%. Property website Rightmove lost 1.7% of its value.
Lloyds fell 1.5% and NatWest slipped 1.2%.
The FTSE 100’s defensive sectors had provided support for the index this week but this was absent on Wednesday as AstraZeneca fell 3% adding to the downside pressure.
Whitbread was the standout gainer, adding 3.2%, after releasing a strong set of half-year results. Repeat hotel guests helped profit before tax rise 44% as revenue surged 17%.