London shares fall on rate hike worries; leadership in focus
Market Performance and Key Drivers
June 23 (Reuters) - London's blue-chip FTSE 100 ended slightly lower, while the mid-cap index hit a more than one-week low on Tuesday, tracking weakness in global markets as prospects of interest rate hikes dampened risk-taking, while investors remained keen on finding out who would be Britain's next leader.
The blue-chip FTSE 100 index closed 0.1% lower, briefly hitting its lowest since June 12, while the midcap FTSE 250 fell 1.2% to its lowest since June 11.
Sectoral Movements
Metals and Mining
• Heavyweight precious and industrial metal miners fell 4% each and led sectoral declines, with Antofagasta down 5.5% and Fresnillo declining 5.2% as prices of gold, silver and copper slid.
Interest Rate Expectations
• Under new U.S. Federal Reserve chair Kevin Warsh, traders are increasingly betting on a second interest rate hike by the U.S. Fed by December, according to LSEG data, compared to expectations of just one 25-basis-point hike two weeks ago.
Defensive Sectors Outperform
• Sectors perceived to fare better in times of economic uncertainty outperformed, with pharmaceuticals, consumer staples and beverages climbing between 1.7% and 2.2%.
Political Developments
Leadership Transition
• Local politics also remained in focus after Prime Minister Keir Starmer's resignation on Monday. His rival Andy Burnham is largely expected to succeed, after another leading contender, former health minister Wes Streeting, said he would endorse Burnham.
Fiscal Policy Outlook
• Investors are keen to find out more about Burnham's plans for fiscal policy at a time when public debt has soared to nearly 100% of economic output. That increase in debt has complicated the work of six prime ministers before him.
Economic Data
Services Sector Contraction
• Meanwhile, data showed that the services sector contracted in June at the fastest rate in nearly three-and-a-half years.
Notable Stock Movers
Bunzl
• Among top movers, business supplies distributor Bunzl gained 5.6% after raising its annual revenue growth outlook following a strong first half, supported by robust demand in North America and some price hikes.
Telecom Plus
• Telecom Plus tanked 25.7% after announcing that its five-year investment plan would slash near-term profits as the UK utility group responds to intensifying competition.
Reporting Credits
(Reporting by Johann M Cherian and Shashwat Chauhan in Bengaluru; Editing by Joyjeet Das and Gareth Jones)
