Third day of FTSE losses as interest rate hike fears weigh down on markets

London’s top index has slipped to its third day of losses as rising gas prices continue to weigh down on major markets.

The FTSE 100 has been feeling the impact of a string of downbeat economic forecasts during the week.

City traders bet on the Bank of England raising interest rates to 4% in the new year to bring down spiralling inflation, according to reports on Tuesday afternoon. This would mean it hits more than double the current rate of 1.75%.

The FTSE 100 closed the day on Wednesday down 16.6 points, or 0.22%, at 7,471.51.

Michael Hewson, chief market analyst at CMC Markets UK said: “European markets have traded in a lacklustre manner today as higher gas prices serve to contain any attempt to push strongly higher.

“Expectations have been rising all week that we could see signalling towards more aggressive rate action from not only the Federal Reserve, but the Bank of England, and the European Central Bank as they try and play catch-up to contain the inflation genie, as expectations start to become ever more embedded.

“The FTSE 100 has once again struggled, down for the third day in a row, although it is well off its lows of the day.

“The strain appears to be being predominantly felt by basic resources on this morning’s news from China that has seen new Covid curbs introduced in cities outside Beijing, with Rio Tinto amongst the biggest fallers.

“House builders are also lower over concerns about what rising interest rates and an impending recession will do to housing demand over the winter period, with Taylor Wimpey and Persimmon near the bottom of the index.”

Elsewhere in Europe, top indices had managed to lift by the end of the day unlike the FTSE. The German Dax was up 0.2% and the French Cac had risen 0.39% when markets closed.

Across the pond, US indices were also in the green ahead of the three-day Jackson Hole Economic Symposium kicking off on Thursday, with global leading economists and policymakers set to discuss the current economic climate.

The S&P 500 was up 0.65% and Dow Jones had lifted 0.55% when European markets closed.

The pound was up by 0.06% against the euro, at 1.1837, and down 0.13% against the dollar, at 1.1802.

The price of Brent crude oil dropped 0.59% at the end of the day, at 99.63 dollars per barrel.

In company news, shares in Aveva surged after reports that one of its major shareholders, Schneider Electric, is considering buying the business.

Schneider holds around 60% of shares in the London-listed software company and the business confirmed that it could bid for the remaining shares that it does not own.

Aveva’s share price jumped by more than a quarter during the day following the announcement. Its share price was up 589p at 2,781p at the end of the day.

Meanwhile, car dealership Lookers hailed significant revenue growth amid soaring second-hand car prices.

It said it managed to make nearly £200 million more in revenue from used car sales in the first half of the year, up by nearly 17% compared to last year.

Shares in Lookers lifted slightly on Wednesday, and closed 8.4p higher at 83.4p.

It was also a good day for Premier Inn-owner Whitbread. The company announced it has invested £200 million into a new hotel development on central London’s the Strand, set to open sometime during 2027.

Shares in the group were up by 12p to 2,547p at the end of the day.

The biggest risers on the FTSE 100 were Aveva Group, up 589p at 2,781p, Pershing Square Holdings, up 105p at 2,750p, Bunzl, up 80p at 3,133p, Dechra Pharmaceuticals, up 80p at 3,498p, and Melrose Industries, up 3.15p at 141.8p.

The biggest fallers on the FTSE 100 were Persimmon, down 45.5p at 1,537p, Land Securities Group, down 18.6p at 664.4p, Prudential, down 25.6p at 928.2p, Centrica, down 1.96p at 82.38p, and Taylor Wimpey, down 2.6p at 110.5p.