London open: Stocks slide after hawkish Fed, ahead of BoE

London stocks slid in early trade on Thursday ahead of the latest policy announcement from the Bank of England, as investors digested another big rate hike from the US Federal Reserve and a hawkish stance.

At 0825 BST, the FTSE 100 was down 1% at 7,166.01, while sterling was trading at a 37-year low against the US dollar, 0.4% weaker at 1.1228.

Overnight, the Fed raised interest rates by 75 basis points as expected and vowed to "keep at it" as it tackles surging inflation. The US central bank also cut its economic growth expectation for this year to 0.2% from 1.7% growth in June.

Derren Nathan, head of equity research at Hargreaves Lansdown, said the Fed had given a firm nod to the hawks that the direction of travel for the cost of borrowing is trending upwards.

"Looking ahead, the US central bank raised its medium-term expectations for federal funds rates, now predicting that they will hit 4.4% by the end of this year and 4.6% by the end of 2023 against previous guidance of 3.4% and 3.8%," he said.

"In Chair Powell’s statement he made several references to ongoing strength in the job market, with unemployment sitting at 50-year lows, and this is likely to give the Fed the confidence to embolden its stance against inflation. This did little to settle market nerves with the major US indices suffering in afternoon trading with the Dow, S&P, and Nasdaq all closing down over 1.7%."

On home shores, the BoE rate announcement was due at midday.

Nathan said: "The Bank of England’s Monetary Policy Committee, due to meet later this morning, could follow the Fed’s lead with its own 0.75% increase in base rates, which would be the largest such rise in over three decades.

"Some are expecting a more modest 0.5% hike in line with August’s decision. Either way this will be another blow to consumer spending power as higher mortgage payments compound the cost-of-living crisis."

In equity markets, Hargreaves Lansdown was the worst performer on the FTSE 100 as it traded without entitlement to the dividend. Crest Nicholson, IG Group, Essentra, JTC and Redrow were also ex-dividend.

Elsewhere, Polymetal tumbled after the Anglo-Russian precious metals miner said it swung to a net loss in the first half amid lower gold sales.

JD Sports was under the cosh after the sportswear retailer posted a drop in interim profits and said it remained cautious about trading through the remainder of the second half, given widespread macro-economic uncertainty and inflationary pressures.

On the upside, Imperial Leather maker PZ Cussons rallied as it said first quarter like-for-like sales rose 6.7% on the back of higher prices but also reported a fall in annual profits due to lower revenues and brand impairment.

Gambling software development company Playtech ticked up as it hailed an "excellent" first-half performance, with a rise in revenues and earnings driven by regulated B2B markets and the Snaitech business.

Market Movers

FTSE 100 (UKX) 7,166.01 -0.99%
FTSE 250 (MCX) 18,506.56 -1.11%
techMARK (TASX) 4,212.70 -0.64%

FTSE 100 - Risers

BAE Systems (BA.) 809.00p 0.50%
Aveva Group (AVV) 3,111.00p 0.29%
Endeavour Mining (EDV) 1,676.00p 0.12%
Unilever (ULVR) 4,054.50p 0.05%
Next (NXT) 5,752.00p 0.00%
Unite Group (UTG) 964.50p 0.00%
Smiths Group (SMIN) 1,499.50p 0.00%
Bunzl (BNZL) 2,759.00p 0.00%
Pershing Square Holdings Ltd NPV (PSH) 2,795.00p 0.00%
B&M European Value Retail S.A. (DI) (BME) 333.00p 0.00%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 847.80p -4.91%
Melrose Industries (MRO) 104.05p -3.43%
Ocado Group (OCDO) 558.00p -2.96%
St James's Place (STJ) 1,064.50p -2.79%
Dechra Pharmaceuticals (DPH) 2,868.00p -2.65%
Ashtead Group (AHT) 4,103.00p -2.61%
Intermediate Capital Group (ICP) 1,141.00p -2.60%
International Consolidated Airlines Group SA (CDI) (IAG) 102.08p -2.60%
Whitbread (WTB) 2,496.00p -2.50%
InterContinental Hotels Group (IHG) 4,380.00p -2.43%

FTSE 250 - Risers

QinetiQ Group (QQ.) 343.60p 2.69%
Petrofac Ltd. (PFC) 115.00p 1.59%
PZ Cussons (PZC) 197.40p 1.13%
JTC (JTC) 740.00p 0.95%
Plus500 Ltd (DI) (PLUS) 1,691.00p 0.65%
FirstGroup (FGP) 123.30p 0.49%
Bank of Georgia Group (BGEO) 2,100.00p 0.24%
Darktrace (DARK) 354.50p 0.23%
Investec (INVP) 396.10p 0.18%
Cranswick (CWK) 2,896.00p 0.14%

FTSE 250 - Fallers

Polymetal International (POLY) 207.00p -8.41%
Redrow (RDW) 473.00p -5.25%
easyJet (EZJ) 324.60p -4.78%
IWG (IWG) 135.40p -4.18%
IG Group Holdings (IGG) 758.00p -4.17%
Bridgepoint Group (Reg S) (BPT) 227.60p -4.13%
Crest Nicholson Holdings (CRST) 210.80p -3.92%
Playtech (PTEC) 455.80p -3.84%
Dr. Martens (DOCS) 262.00p -3.61%
TUI AG Reg Shs (DI) (TUI) 129.45p -3.54%