FTSE 100 back in the red as bank shares slide

The FTSE 100 slipped into the red as the UK’s inflation rate hit another 40-year high in September.

London’s top index lost grip of the gains made earlier in the week as enthusiasm waned in the aftermath of Chancellor Jeremy Hunt’s fiscal policy U-turns.

The FTSE 100 closed 11.75 points lower, or 0.17%, at 6,924.99.

The UK’s Consumer Prices Index reading came in above expectations, at 10.1% in September, driven up by surging food prices, the Office for National Statistics said.

And London’s top index was driven down by sliding shares in Britain’s biggest banks, after reports Mr Jeremy Hunt could be weighing up a decision to slap higher taxes on lenders’ profits.

Shares in FTSE 100-listed banking giants Lloyds Banking Group, Natwest, and Barclays were all down on Wednesday as investors reacted to the speculation.

Michael Hewson, chief market analyst at CMC Markets UK, said: “UK banking shares have struggled the most today on fears that they could be hit by a new windfall tax, on top of the 8% banking surcharge they pay, on top of the corporation tax rate.

“With that due to rise to 25% next year, it seems there is no length that politicians will stoop to try and fill various holes in the public finances.

“Never mind that they risk crushing investment in the process.”

The pound also slipped back down from its gains earlier in the week. It was down 0.75% against the US dollar when markets closed, at 1.1236 dollars, and just fractionally up by 0.02% against the euro, at 1.1484 euros.

The more downbeat sentiment was reflected across European and US markets as well. The German Dax closed 0.19% lower and the French Cac was down 0.43%.

In the US, the S&P 500 was down 0.29% and Dow Jones edged up by 0.03% when European markets closed.

In company news, it has been a tumultuous day for online fashion retailer Asos, which said it needs to write off up to £130 million of stock amid a slump in consumer spending.

It told shareholders it made a pre-tax loss of £31.9 million in the year to August 31, a sharp drop from the £177 million in profit it made a year ago.

Nevertheless, investors were placated by the group’s plans for a turnaround and its shares jumped up by 12.2%.

On the other hand, Just Eat Takeaway.com cheered a return to underlying profit earlier than expected after embarking on a “path to profitability” earlier in the year.

It said it achieved underlying earnings in the third quarter despite the number of takeaway orders dropping by 11% in the period.

Shares in Just Eat were up by 2%.

Elsewhere in the food and drinks world, Revolution Bars said Tube and train strikes had driven down sales, which dropped by 9% compared to the previous year, over the past quarter.

But it also delivered good news for shareholders in the form of a £16.5 million takeover of pub operator the Peach Pub Company.

However, investors were spooked by the sales slump and shares in Revolution Bars plunged by 13.5%.

The biggest risers on the FTSE 100 were BP, up 10p to 455.25p, International Consolidated Airlines Group, up 2.24p to 118.1p, Pershing Square Holdings, up 50p to 2,720p, HSBC Holdings, up 8.25p to 474p, and Vodafone Group, up 1.55p to 101.16p.

The biggest fallers on the FTSE 100 were Kingfisher, down 12.7p to 203p, Segro, down 35.2p to 715.4p, Lloyds Banking Group, down 2p to 40.61p, Hargreaves Lansdown, down 33.8p to 765.2p, Rightmove, down 20.3p to 460.2p, and Dechra Pharmaceuticals, down 106p to 2,608p.