Financials, consumer staples boost FTSE 100; BoE rate hike bets rise

By Sruthi Shankar and Bansari Mayur Kamdar

(Reuters) – UK’s benchmark FTSE 100 index rose on Tuesday as a buoyant global mood and strong gains by banks and consumer staples offset fears of a big interest rate hike next month after stronger-than-expected jobs data.

The blue-chip FTSE 100 reversed early losses and gained 1.0%, while the domestically focussed midcap 250 index advanced 1.4%.

“The main trigger of (the) higher move is the scaling back of the recession fears and global market optimism. Though, what we see today is likely a bear market bounce,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Britain’s unemployment rate held at 3.8% in the three months to May and the number of people in work rose by the most since the middle of 2021, data showed, suggesting the cost-of-living squeeze has not yet hit demand for staff.

Traders were pricing in a 90.4% chance of an aggressive 50 basis point rate hike next month, with consumer prices and retail sales data due later this week likely offering fresh clues on inflation and the health of the British consumer.

Banks rose 1.7% boosting the blue-chip index, along with defensive stocks like consumer staples. Unilever and British American Tobacco added 2.0% and 1.3%, respectively.

“Now that interest rates are rising, there is this expectation that it’s going to have a positive impact on interest revenue (of banks) if we don’t have a recession,” added Ozkardeskaya.

“Banking stocks are acting in a really cyclical way.”

Money transfer company Wise jumped 14.9% after posting strong revenue growth.

Cybersecurity firm Darktrace Plc added 4.8% after it raised its full-year profit margin forecast on the back of steady customer growth.

The biggest decliner on the small-cap index was Made.com , which slumped 46.0% to a record low, after the company slashed its sales and earnings guidance for 2022, saying it did not expect an improvement in demand for big-ticket items any time soon.

Meanwhile, former finance minister Rishi Sunak held on to his lead among Conservative lawmakers in the race to replace Boris Johnson as prime minister, but his two remaining rivals were closing the gap, leaving the race wide open.

(Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; editing by Uttaresh.V, Amy Caren Daniel and Jonathan Oatis)