This morning, the sell-off in the FTSE 100 index intensified as it dropped by over 100 points. Worries about the impact of rising interest rates affected both multinational resource stocks and UK-centric consumer companies alike.
The blue-chip index fell 1.4% points to 7339.27. Data from the construction sector pointed to a contraction, adding to concerns about the existing impact of 13 successive rate hikes from the Bank of England, with more to come.
The Purchasing Managers’ Index for the sector failed to surpass the threshold of 50, the line that indicates growth, coming in at 48.9, falling short of the expected 51. This had a negative effect on housebuilders. Taylor Wimpey declined by 2% to 99p, while Persimmon dropped by 2.4% to 990p.
London’s multinational companies also faced pressure. Fears that the most influential central bank in the world – the US Federal Reserve – will resume its program of rate hikes impacted mining giants due to concerns about the effects of higher borrowing costs on global growth. The concerns followed minutes from the Fed’s last monetary policy meeting released overnight, which indicated that the decision to not increase rates was only a pause.
Glencore was one of the biggest decliners in London, down 3% to 443p. Antofagasta dropped by 2.5% to 1424p and BHP saw a decline of 2.2% to 2287p.
However, there were also other worries about the outlook for the impact of higher interest rates closer to home.
Jet2, the airline and package holiday firm, pointed to the impact of the cost-of-living crisis on demand and revealed that the proportion of seats sold on flights as it scaled its operations up had decreased. Costs were also rising faster than the rebound in sales, even if the overall outlook for the upcoming summer getaway looked promising.
But the company’s sense of caution resonated with wider unease at the prospect of rate hikes, and fellow travel stocks and other companies that depend on discretionary spending for income faltered.
EasyJet dropped by 2.8% to 485p. Tui, the tour operator, declined by 3.5% to 583p.
