UK shares slip as rate-hike jitters overshadow cheer from lower British inflation

22, which would be its biggest rate rise since 1989, excluding a brief attempt to bolster sterling during a 1992 exchange rate crisis. Among individual sectors and shares, energy and mining stocks shed 1% each as oil and metal prices fell on fears that aggressive rate hikes could slow down global growth and dampen demand.

UK shares fell on Wednesday as a surprise fall in British consumer prices did little to ease bets of a 75 basis point hike by the Bank of England at its meeting next week.

Denting sentiment further, Wall Street closed lower overnight after a hotter-than-expected U.S. inflation reading raised bets for more aggressive policy tightening in the world's largest economy. The FTSE 100 slid 0.7% by 0804 GMT, underperforming its pan-European peers, as commodity stocks took a hit.

British consumer price inflation unexpectedly fell last month on lower fuel prices, official figures showed, offering some relief to households after the CPI rate hit a 40-year high. "The 9.9% inflation is still bad news after we've had six rate hikes by the Bank of England since December last year," said David Madden, a market analyst at Equiti Capital.

"The fear is (that) more interest rate hikes are going to come, (and) the question is how big they would be." Traders are seeing an 84% chance of a 75 basis point hike in the interest rate to 2.5% by the Bank of England on Sept. 22, which would be its biggest rate rise since 1989, excluding a brief attempt to bolster sterling during a 1992 exchange rate crisis.

Among individual sectors and shares, energy and mining stocks shed 1% each as oil and metal prices fell on fears that aggressive rate hikes could slow down global growth and dampen demand. Defensive stocks such as consumer staples and healthcare also fell, with Unilever, AstraZeneca and British American Tobacco down between 0.5% and 1.4%.

The domestically focussed mid-cap index declined 0.4%. Redrow gained 1.2% after the housebuilder said underlying pre-tax profit jumped 31% for the 53 weeks to July 3, while revenue climbed 10%.

However, its gains were capped as the company warned that housing demand was moderating to historical levels following two strong years for the sector as housebuilders brace for a tough market, hurt by rising mortgage rates and a worsening cost-of-living crisis. Croda International rose 2.1% on a ratings upgrade from Jefferies.

 

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