London midday: FTSE, sterling maintain losses as BoE raises rates to 3%

London stocks and sterling maintained their losses just after midday on Thursday as the Bank of England hiked rates by 75 basis points in a bid to tackle surging inflation.

The FTSE 100 was down 0.8% at 7,087.04, while sterling was 1.4% lower versus the dollar at 1.1238 - having already slumped ahead of the announcement - after the BoE lifted rates to 3% as expected. This took interest rates to their highest level since the financial crisis in 2008 and marked the biggest increase in 33 years, driving up costs for millions of borrowers.

The Bank voted 7-2 in favour of the move, with one call for a 50 basis points increase and another for a 25bps hike. The BoE also said it now expects inflation to peak at 11% in the current quarter, up from 10.1% in September.

Overnight, the US Federal Reserve lifted rates by 75 basis points, as expected, with Chair Jerome Powell warning that there was still some way to go and that incoming data since the central bank’s last meeting "suggests that the ultimate level of interest rates will be higher than previously expected".

Investors were also mulling a survey released earlier, which showed that the UK services sector shrank in October for the first time since February 2021 as the mini-budget took its toll.

The S&P Global/CIPS services purchasing managers’ index declined to 48.8 from 50.0 in September, marking the worst reading since January last year. A level below 50.0 signals contraction, while a reading above indicates expansion.

The survey found that political uncertainty and rising borrowing costs since the mini-budget had adversely impacted business investment and encouraged a wait-and-see approach to new projects.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: "There were also many reports that higher energy bills had led to reduced spending on non-essential services.

"Overall input price inflation slowed for the fifth month running during October, which signalled a gradual easing of cost pressures from the record highs seen this spring. However, the latest rise in business expenses was still faster than at any time in the survey history prior to the pandemic, driven by further steep increases in energy costs and staff wages.

"Stubbornly high inflation, increased borrowing costs and worries about the UK economic outlook all contributed to weaker business optimism in October. Aside from the slump at the start of the pandemic, the degree of confidence across the service economy is now the lowest since December 2008."

In equity markets, RS Group - formerly Electrocomponents - tumbled on news its chief executive will be taking a leave of absence.

BT Group slumped as it confirmed it is seeking a further £500m of savings after being hit by surging inflation, including higher energy prices.

Rolls-Royce slid after the engine maker held annual guidance as the rebound in post-pandemic air travel continued and said recent market turmoil and inflation had not impacted cash flow.

Ashmore and Renishaw both fell sharply as they traded without entitlement to the dividend.

On the upside, supermarket chain Sainsbury's was a high riser even as it posted a dip in first-half profits amid the cost-of-living crisis.

Trade kitchen supplier Howden Joinery rallied after saying it now expects FY2022 pre-tax profit to be "marginally" ahead of consensus forecasts as it hailed strong revenue growth.

Market Movers

FTSE 100 (UKX) 7,087.04 -0.80%
FTSE 250 (MCX) 18,031.64 -1.02%
techMARK (TASX) 4,240.30 -0.89%

FTSE 100 - Risers

Sainsbury (J) (SBRY) 207.10p 4.68%
Harbour Energy (HBR) 395.60p 2.89%
Tesco (TSCO) 221.50p 2.17%
Haleon (HLN) 271.70p 1.74%
Smith & Nephew (SN.) 1,021.50p 1.59%
British American Tobacco (BATS) 3,311.50p 1.15%
Admiral Group (ADM) 2,012.00p 0.95%
Pershing Square Holdings Ltd NPV (PSH) 2,870.00p 0.88%
Airtel Africa (AAF) 119.10p 0.85%
Imperial Brands (IMB) 2,090.00p 0.82%

FTSE 100 - Fallers

RS Group (RS1) 876.00p -8.22%
BT Group (BT.A) 119.00p -6.85%
Rolls-Royce Holdings (RR.) 78.62p -5.35%
Endeavour Mining (EDV) 1,463.00p -4.50%
Flutter Entertainment (CDI) (FLTR) 11,220.00p -4.02%
Antofagasta (ANTO) 1,135.00p -3.49%
SEGRO (SGRO) 761.40p -3.45%
Halma (HLMA) 2,051.00p -3.16%
Fresnillo (FRES) 699.00p -3.00%
Rentokil Initial (RTO) 510.20p -2.93%

FTSE 250 - Risers

Ferrexpo (FXPO) 102.80p 5.17%
Bank of Georgia Group (BGEO) 2,365.00p 4.88%
Howden Joinery Group (HWDN) 535.80p 3.32%
Lancashire Holdings Limited (LRE) 541.00p 2.66%
Auction Technology Group (ATG) 863.00p 2.13%
Genus (GNS) 2,688.00p 1.66%
JPMorgan Japanese Inv Trust (JFJ) 458.00p 1.55%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 431.50p 1.53%
TBC Bank Group (TBCG) 2,090.00p 1.46%
Essentra (ESNT) 215.50p 1.41%

FTSE 250 - Fallers

Ashmore Group (ASHM) 196.10p -8.11%
TI Fluid Systems (TIFS) 124.00p -6.63%
Tritax Eurobox (GBP) (EBOX) 60.20p -4.44%
Safestore Holdings (SAFE) 879.00p -4.40%
Dr. Martens (DOCS) 241.00p -4.29%
Big Yellow Group (BYG) 1,092.00p -4.13%
Bridgepoint Group (Reg S) (BPT) 203.20p -3.97%
Workspace Group (WKP) 410.20p -3.62%
International Distributions Services (IDS) 195.80p -3.55%
Hochschild Mining (HOC) 50.85p -3.51%