London stocks tumble after Bank of England confirms interest rate hike

Rising interest rates, cuts to the UK growth forecast and inflation warnings across Europe all helped to drag the London markets into the red on Thursday.

The Bank of England’s Monetary Policy Committee (MPC) confirmed an expected increase in rates to 0.5% but were one more hawkish vote away from an even sharper jump.

Soaring inflation forecasts and gloomier growth predictions in London were already worrying some traders before the European Central Bank said inflation risks “tilted” upwards and raised the potential for its own interest rate rise.

Elsewhere on a hectic day in the City, energy stocks were broadly higher after the 54% increase in the energy price cap was announced alongside a new Treasury support package.

The FTSE 100 ended the day down 54.16 points, or 0.71%, at 7,583 points.

Chris Beauchamp, chief market analyst at IG, said: “It is clear that some policymakers are now very worried about inflation getting out of control, but while the bank is only supposed to worry about inflation and not the impact of rate hikes on the consumer, it will have to consider the risks of stalling economic growth with its tighter monetary policy.

“Some of that nervousness is being reflected across the FTSE 350 today, with stocks heading lower in the wake of the news.”

Sterling meanwhile had a shot in the arm after the surprise appearance of hawks at the Bank, with four MPC members calling for a larger jump in rates.

However, Mr Beauchamp added that it fell back swiftly after the “ECB came thundering in with its own shift” moments after the Bank’s rate news started to settle.

The pound was down 0.1% against the US dollar to 1.359, and decreased 0.26% against the euro to 1.188.

In European markets, trader sentiment took a sharp dive, to take the French Cac down 1.54% and German Dax 1.57% lower.

Across the Atlantic, the Dow Jones plunged as nervousness in Europe shook Wall Street.

In company news, newly unified Shell made gains after revealing a 14-fold increase in profits after the price of gas soared.

Shareholders welcomed its £12 billion pre-tax profit, sending shares 27.6p higher to 1,960p on the day households saw the extent their energy bills will surge.

Playtech rose to the top of the FTSE 250 after the gambling software firm said TTB, an affiliate of second-largest shareholder Gopher, was considering a takeover offer.

The announcement came a day after shareholders shot down its proposed £2.7 billion takeover by Australia’s Aristocrat leisure, giving its shares a needed lift.

Playtech shares moved 48.5p higher to 633.5p at the close.

Virgin Wines lost almost a quarter of its value, with shares falling 45p to 155p, after the company warned both sales and profits for the year would miss guidance after Christmas trading was knocked by staff shortages and freight disruption.

Meanwhile, the price of Brent crude increased by 0.54% to 89.95 US dollars per barrel when the London markets closed.

The biggest risers on the FTSE 100 were Compass, up 66.5p at 1,720p; Shell, up 27.6p at 1,960p; Rolls-Royce, up 1.46p at 116.66p; and Vodafone, up 1.26p at 133.58p.

The biggest fallers were Flutter, down 595p at 10,620p; BT, down 9.45p at 186.05p; Croda, down 386p at 7,810p; and Dechra, down 190p at 4,056p.