(Alliance News) - Stocks in London ended sharply lower on Thursday after the Bank of England followed the Federal Reserve and raised interest rates as widely expected, while the Swiss National Bank delivered a surprise hike of its own.
The US central bank on Wednesday ended days of speculation by enacting its sharpest interest rate hike in almost 30 years, in a bid to tame rampant inflation, and while the BoE was not as aggressive, it nonetheless hiked by 25 basis points.
The SNB unexpectedly followed suit as it increased interest rates for the first time since 2007, shifting away from a battle to tame a stronger currency to focus on inflation.
The SNB raised the policy rate and the interest rate on sight deposits by half a percentage point to minus 0.25%.
The FTSE 100 index closed down 228.43 points, or 3.1%, at 7,044.98. The FTSE 250 ended down 588.50 points, or 3.1%, at 18,727.48, and the AIM All-Share closed down 25.06 points, or 2.7%, at 892.71.
The Cboe UK 100 ended down 3.2% at 702.93, the Cboe UK 250 closed down 3.2% at 16,472.62, and the Cboe Small Companies ended down 2.1% at 13,804.54.
In European equities, the CAC 40 stock index in Paris ended 2.4% lower, while the DAX 40 in Frankfurt closed down 3.3%.
"After breaking a six-day run of declines yesterday, European markets have resumed normal service to the downside, after the Swiss National Bank unexpectedly hiked rates by 50bps, following on from last night's 75bps rate rise by the Federal Reserve, with the Bank of England following up with another 25bps," said CMC Markets analyst Michael Hewson.
"Today's declines have seen big falls across the board, below the lows this week, with all the major European markets falling to three-month lows, with the DAX and FTSE100 on course to head towards the levels we saw at the beginning of March in the aftermath of the initial Russian invasion of Ukraine," Hewson added.
In the FTSE 100, Informa ended among a handful of stocks in the green, up 1.0%, after the events organiser and business publisher more than doubled the scope of its share buyback programme.
Informa scaled up its buyback programme to GBP725 million from GBP300 million, saying this is expected to see the company maintain the current level of buybacks through to year-end.
The move on shareholder returns came as the events organiser and business information publisher said trading through the first five months of 2022 has been "robust", with underlying revenue growth of more than 40%. Informa is on track to deliver at the upper end of full-year guidance for both revenue and adjusted operating profit, it said.
At the other end of the large-caps, Persimmon and Intermediate Capital Group ended the worst performers, down 12% and 7.6% respectively. The stocks went ex-dividend meaning new buys no longer qualify for the latest payout.
In the FTSE 250, Inchcape ended the best performer, up 3.7%, after the car dealer continued to perform "strongly" since its first quarter update in April, with results exceeding its expectations.
Inchcape expects to deliver full-year pretax profit from continuing operations between GBP350 million and GBP370 million, well above a company-cited consensus figure of GBP301 million. For 2021, it reported profit before tax and exceptional items of GBP296 million.
Elsewhere in London, THG lost 29% after two suitors ended their pursuit of the online beauty products vendor.
Venture capital firm Candy Ventures, owned by Nick Candy, said it does not plan on making a bid for THG. It had said in May it was in the "very early stages" of considering a possible offer.
Candy's decision to not mount a firm offer follows a private equity consortium which earlier on Thursday also confirmed its interest in THG will not result in an official bid.
Belerion Capital Group confirmed that it, together with King Street Capital Management LP, does not intend to make a takeover offer for THG.
ASOS closed down 32% after the online fashion retailer lowered annual guidance after its third quarter was hit by inflationary pressures and a high clothing return rate.
Separately, the retailer promoted Chief Commercial Officer Jose Calamonte to chief executive and also lifted Non-Executive Director Jorgen Lindemann to the role of chair. Calamonte replaces Nick Beighton who stepped down in October as part of a management shake-up.
Fast-fashion rival boohoo Group closed 11% lower after the retailer once again warned on inflation and high clothing return rates, though it left annual guidance unchanged.
In the three months to May 31, its first quarter, group revenue declined 8.3% to GBP445.7 million from GBP486.1 million a year earlier. On an annual basis, boohoo suffered a chunky 26% decline in US sales, while UK sales were down 1%.
In the three months to May 31, the company said revenue declined 0.5% to GBP983.4 million from GBP987.9 million a year earlier.
Looking ahead, the London-based firm said full-year sales are now expected to grow in a range of 4% to 7%, "reflecting market volatility and an increased returns rate". It expects to take a gross margin hit of between 150 basis points and 200 basis points amid elevated returns. Adjusted pretax profit was given in a new range of GBP20 million to GBP60 million.
In January, and before the outbreak of war in Ukraine, it had guided to revenue growth around 10% to 15% and adjusted pretax profit of GBP110 million to GBP140 million.
Walid Koudmani, chief market analyst at XTB commented: "We saw yet more heavy selling in Boohoo shares price after the retailer posted its first ever drop in UK sales. A 1% drop in UK sales - and 8% overall - sends a signal to investors of the difficulty the retailer faces despite making progress on its turnaround plans."
The pound was quoted at USD1.2311 at the London equities close, up sharply from USD1.2050 at the close Wednesday after the Bank of England jacked up rates to a 13-year high.
The nine-strong Monetary Policy Committee voted to raise the Bank Rate by a quarter-point to 1.25% from 1.00%, taking interest rates to their highest levels since 2009.
The bank lifted interest rates for the first time post-pandemic in December 2021, and has hiked at every meeting since.
June's vote wasn't unanimous, with six members in favour of the quarter-point increase and three dissenters supporting a heftier 50 basis point increase.
"The Bank of England has stuck to its guns and hiked rates by another 25 basis points, resisting pressure to go faster. The hawkish spin in the policy statement suggests a 50bp hike is entirely possible in August. But the bigger signal here is that, by pricing a terminal rate close to 3.5% next year, markets are overestimating the tightening still to come," said ING economist James Smith.
The euro stood at USD1.0509 at the European equities close, higher against USD1.0395. Against the yen, the dollar was trading at JPY132.22, down from JPY134.60.
Stocks in New York were sharply lower at the London equities close erasing Wednesday's post-Fed rally.
The DJIA was down 2.8%, the S&P 500 index down 3.3% and the Nasdaq Composite down 4.0%.
The US central bank raised the benchmark borrowing rate on Wednesday by 0.75 percentage points, bigger than the telegraphed half-point increase after economic data in recent days showed inflation strengthening and consumer confidence weakening.
Markets had initially welcomed the super-sized move, the first 75-basis-point rate hike since November 1994.
Brent oil quoted at USD118.37 a barrel at the equities close , down from USD120.95 at the close Wednesday.
Gold stood at USD1,841.77 an ounce at the London equities close, higher against USD1,821.35 late Wednesday as the dollar weakened.
The economic events calendar on Friday has an inflation print from the eurozone at 1000 BST.
The UK corporate events calendar on Friday has first-quarter results from the UK's largest supermarket chain Tesco.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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