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UK stocks fall after BoE rate hike; ASOS slump

UK stocks fall after BoE rate hike;  ASOS slump

 


A worker walks through the London Stock Exchange on October 1, 2008, sheltering from the rain under a Union Flag umbrella. REUTERS/Toby Melville

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Bank of England raises interest rate by 25bp ASOS warning raises concerns for retail sector

June 16 (Reuters) – The London stock index fell Thursday as the Bank of England (BoE) raised its expected interest rate by a quarter point while earnings warnings from online fashion retailer ASOS hit the retail sector.

The high-quality FTSE 100 index (.FTSE) and the domestic mid-cap FTSE 250 index (.FTMC) both closed 3.1% lower.

The central bank raised rates to 1.25%, the highest level since January 2009, and followed a gradual approach, warning that the UK economy would contract in April-June. read more

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The 25 basis point rate hike is in response to rising expectations for a bigger hike, especially since the US Federal Reserve raised its key interest rate by 75 basis points since 1994.

Laith Khalaf, head of investment analysis at AJ Bell, said, “The Bank of England is playing a game of slow and noticeable inflation rather than the shock and awe strategy used across the Atlantic.”

“The market will undoubtedly take this as a sign that the Bank of England is sick, but a progressive strategy allows the interest rate board to observe more data as it comes in and fine-tune its approach as the situation arises.”

Petroleum majors BP (BP.L) and Shell (SHEL.L) lost more than 5.1%, accounting for the largest weight in the FTSE 100 Index, while industrial miners (.FTNMX551020) lost 4.2%.

Shares of global companies, including Diageo (DGE.L) and British American Tobacco (BATS.L), fell 2.2% and 3.5%, respectively, as the pound strengthened on news of a rate hike. read more

Interest rate sensitive banks (.FTNMX301010) fell 3.8%.

Homebuilder Persimmon (PSN.L) and asset manager Intermediate Capital (ICP.L) traded without dividends, falling 12.0% and 7.6%, respectively, to the index bottom.

ASOS Plc (ASOS.L) fell 32.5% and Boohoo (BOOH.L) fell 11.3%. It was after an online fashion retailer warned of the pain caused by increased product returns as consumers battle inflation and return to pre-pandemic behavior. read more

The Broad Retail Index (.FTNMX404010) fell 3.9%.

Informa (INF.L) rose 1.0% after event organizers more than doubled its share buyback program and expected optimistic annual sales and profit outlook. read more

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Reports by Devik Jain and Amal S in Bengaluru; Edited by Arun Koyyur and Bernadette Baum

Our Standard: The Thomson Reuters Trust Principle.

Sources

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2/ https://www.reuters.com/markets/europe/ftse-100-falls-boe-rate-hike-looms-asos-slides-profit-warning-2022-06-16/

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