By Patrick Munnelly, Market Strategist, Tickmill
On Tuesday, the London stock market experienced a significant decline driven by concerns stemming from remarkable wage growth, which heightened fears of inflation and potential additional interest rate increases.
In the three months leading up to June, British wages, excluding bonuses, surged an unprecedented 7.8% higher than the previous year. This escalation in wage growth contributed to the Bank of England’s (BoE) concerns regarding persistent inflation in the long term. This, in turn, has raised the likelihood of interest rates remaining elevated for an extended period.
The FTSE 100 index, which is weighted towards exporters, witnessed a decline of 1.6%. This drop was attributed to the pound’s increase, rising by up to 0.28% to reach $1.2720 immediately following the release of the wage growth data. The surge in the pound was accompanied by a corresponding rise in both short-term and long-term gilt yields. Stocks in the real estate sector, sensitive to interest rate changes, experienced a decline of 1.9%.
FTSE 100 biggest movers
Legal & General Group Plc LON:LGEN, a UK-based insurer, experienced a decline of 2.6% in its share value on the back of its half year report published today. During the first half of the year, Legal & General’s operating profit displayed a decrease. The reported figure stood at 941 million pounds ($1.20 billion), as opposed to the previous year’s 958 million pounds. Furthermore, the company’s internally gathered consensus forecast for the operating profit in the first half was noted at £834m.
UK home construction companies and property stocks faced a downward trajectory as concerns over potential rate hikes weighed heavily on the market sentiment. The index tracking UK homebuilders experienced a decline of 1.3%, marking the third consecutive day of losses. Meanwhile, the FTSE Real Estate index, which encompasses both commercial property enterprises and real estate investment trusts (REITs), also witnessed a drop of 1.4%. In terms of specific stock performance,
Persimmon LON:PSN experienced a decline of 2.1%, emerging as the most significant percentage loser on the UK housebuilders’ index. Industrial miners were once again leading the charge lower as concerns regarding the Chinese economy continue to linger, leaving Anofagasta [LON:ANTO} bottom of the index today nursing losses of 3.6% with Glencore LON:GLEN in hot pursuit, down 3.3%.
On the positive side of a heavily negative ledger, B&M European Value Retail LON:BME saw an uptick in its share price as investors believe the higher rate environment will drive consumers to see additional value from spending. Shares in the value retailer rose 2.24% by the close
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