By Patrick Munnelly, Market Strategist, Tickmill
The FTSE 100 index has reached a three-month low due to the impact of rising interest rates on commercial landlords’ property valuations. As interest rates increase, the value of properties owned by these landlords tends to decline, leading to a negative effect on their overall investment volumes. Additionally, higher borrowing costs further exacerbate the situation.
Land Securities LON:LAND, a prominent player in the index, has seen their shares drop by 4.2% today.
British house building declines
The UK housebuilders’ index has also fallen by 2.1% as all constituents of the index are trading in the red. This decline comes as a survey reveals that British house building experienced the sharpest decline in June, excluding two months during the early stages of the COVID-19 pandemic, in more than 14 years. The decrease in house building activity is attributed to higher borrowing costs, which have dampened demand and had a negative impact on the broader construction sector. In line with the overall index decline, The anticipation of higher interest rates has resulted in an increase in mortgage rates, further hampering housing demand and negatively affecting the performance of house building companies. FTSE 100 members Taylor Wimpey LON:TW., Persimmon LON:PSN, and Barratt Developments LON:BDEV have all experienced declines of over 2.4% by the close. The combination of weak homebuilding data and worries about potential rate hikes has contributed to the downward trend in the shares of UK housebuilders.
FTSE 100 biggest movers
Industrial metal miners faced a decline of 1.8% in the UK benchmark index, reflecting the downward pressure on prices of most base metals. This drop in the mining sector is notable within the commodity-heavy FTSE 100 index, which has been underperforming compared to other global benchmarks this year. The volatility in resource prices, combined with an uncertain global outlook, has contributed to the challenges faced by the UK benchmark. As a result, investors have witnessed a decline in industrial metal miners as the prices of base metals have come under pressure, Glencore LON:GLEN sits at the bottom end of the table off 5.5%, followed by Antofagasta LON:ANTO, down 5.3% on the session.
On the positive side of a very negative ledger sits United Utilities LON:UU., the water utility firm, which experienced a 1.5% increase in its share price following an upgrade from Morgan Stanley. The financial institution raised United Utilities’ rating from “equal-weight” to “overweight.”
Podcast: Everything you need to know about the FTSE 100 Index
Subscribe to our podcast on your favourite platform
Don’t miss out on our weekly podcast. You can find us on Spotify, Soundcloud, Amazon, Apple, YouTube and many other popular platforms
