FTSE 100 falls for fifth session, eyes on BoE moves to stem bond rout

Tue, 11th Oct 2022 17:23

Banks, insurers among the biggest decliners

Marston's climbs on upbeat results

FTSE 100 down 1.1%, FTSE 250 off 1.3%

Oct 11 (Reuters) - Britain's main stock indexes fell on Tuesday, as geopolitical risks and the prospect of higher interest rates hit global markets, with investors focussing on fresh measures by the Bank of England (BoE) to try to stem the rout in government bonds.

The central bank, battling to stabilise Britain's 2.1 trillion pound ($2.3 trillion) bond market, said it would buy up to 5 billion pounds of inflation-linked debt per day, starting Tuesday, until the end of this week.

The pound reversed course and gained 0.8%, weighing on the export-heavy FTSE 100 index.

Data showed Britain's unemployment rate fell to 3.5% in the three months to August, the lowest since 1974.

The blue-chip FTSE 100 fell 1.1%, its fifth consecutive day of losses, with financial stocks dragging the index lower.

Shares of pension providers such as Legal & General , Prudential and Aviva fell between 4.2% and 5.2%.

"The stocks that are getting impacted the most are stocks that are priced off the bond market ... the real estate companies, asset backed companies, where it's clear that the cost of capital is going to go up," said Roger Jones, head of equities at London & Capital.

Britain's banking index was down 2.0% at a one-week low, despite prospects of a large rate hike by the BoE next month.

"We are heading into earnings season, we get a number of banks giving us their update on Friday," said Danni Hewson, analyst at AJ Bell.

"There's concern about how they've fared and whether or not their profits will have fallen because there's just not been the same level of deal-making which helps big banks see fantastic profits and investment banking activity has really been curtailed."

However, the internationally focussed FTSE 100 has outperformed Britain's domestically exposed FTSE 250 this year, as a weakening pound and strength in commodity prices boosted the former.

The FTSE 100 has shed 6.8% so far in 2022, while the midcap index has lost about 28% - set for its worst annual performance since 2008.

Marston's gained 5.8% after the pub operator said annual total retail sales came in higher than 2019 numbers, as people continued to splurge on drinks and food. (Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; Editing by Neha Arora and Mark Potter)