By Patrick Munnelly, Market Strategist, Tickmill
The UK’s FTSE 100 index closed the day in the red, dropping 57 points to finish on 7502.03,
Bank of England surprises the market
UK homebuilders suffered further losses as the Bank of England (BoE) surprised the market by raising interest rates by a larger than anticipated half a percentage point to 5%. The British home builder index declined by as much as 2.7%, hitting its lowest level in nearly seven months. This came after a 3.2% drop on Wednesday.
The BoE’s decision to raise rates was driven by “significant” news indicating that British inflation would persist for a longer period. Inflation for May came in higher than expected at 8.7%, adding to concerns. As a result, FTSE 100 homebuilders Persimmon LON:PSN, Barratt Developments LON:BDEV, and Taylor Wimpey LON:TW., each saw their shares decline by more than 1.7%.
The decline in homebuilder stocks had already begun prior to the BoE’s interest rate decision, reflecting market expectations and concerns surrounding the potential impact on the housing market.
FTSE 100 biggest movers
Airtel Africa LON:AAF finds itself at the bottom of the blue-chip list, experiencing a 5%+ decline in its share price. The drop comes as reports circulate that the company is expected to face a significant impact on its revenues, amounting to US$1.3 billion, and a profit loss of US$740 million due to the devaluation of the Nigerian naira. Nigeria serves as Airtel Africa’s largest market in Africa.
On the positive side of the ledger Ocado Group LON:OCDO has once again topped the FTSE leaderboard amid reports suggesting it could be a potential takeover target for Amazon NASDAQ:AMZN. Following a recent decline in share price to a six-year low, market rumors of bid interest have started to circulate, according to The Times. The report highlighted that Ocado has seen a boost this week due to speculation of interest from multiple American suitors. As a result of the takeover rumors, shares of the online grocery technology company surged by 32% by the close. This increase brings the share price back to levels last seen back in February, having fallen to a low of 342p in early June.
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