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UK stocks fall on rate hike concerns

stocks fall

The FTSE 100 fell 0.2%, while the midcap 250 index slipped 0.1%

UK stocks fell on Tuesday after stronger-than-expected jobs data supported the case for a big interest rate hike next month and as shares of online furniture retailer plunged after an earnings forecast cut.

The blue-chip FTSE 100 fell 0.2% in morning trade, while the domestically focussed midcap 250 index slipped 0.1% tracking Wall Street’s move overnight.

Britain’s unemployment rate held at 3.8% in the three months to May and the number of people in work rose by the most since the middle of 2021, data showed, suggesting the cost-of-living squeeze has not yet hit demand for staff.

Traders were pricing in an 86% chance of an aggressive 50 basis point rate hike next month, with consumer prices and retail sales data due later this week likely offering fresh clues on inflation and health of the British consumer.

Investors will be surprised if they (BoE) don’t do a 50 basis points (bps) rate hike in August, said David Madden, market analyst at Equiti Capital.

For the June meeting, they only hiked by 25 bps. This time around, all the central banks around the world are not only hiking, but doing large hikes. The cost-of-living crisis is the absolute number one story in the UK, he said.

Among individual stocks, UK-listed shares of BHP Group slipped 1.2% after the global miner joined rival Rio Tinto in warning that a tight labour market, supply-chain snags and inflationary pressures would continue through fiscal 2023.

Money transfer company Wise jumped 12.7% after posting strong revenue growth.

Cybersecurity firm Darktrace Plc added 7.4% after it raised its full-year profit margin forecast on the back of steady customer growth.

The biggest decliner on the small-cap index was, which slumped 39.5% to a record low, after the company slashed its sales and earnings guidance for 2022, saying it did not expect an improvement in demand for big-ticket items any time soon.

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