UK shares slide as BoE rate hike looms; ASOS tumbles on profit warning

By Devik Jain

(Reuters) – London stock indexes fell on Thursday as investors braced for the fifth interest rate hike by the Bank of England in its quest to combat inflation nearing double-digits, while a profit warning by online fashion retailer ASOS hit the retail sector.

The FTSE 100 index slipped 1.4%, weighed down by a 2% decline in shares of British American Tobacco and Shell.

Homebuilder Persimmon and asset manager Intermediate Capital slumped 8% and 6.4%, respectively, to the bottom of the index as their shares traded ex-dividend.

The domestically focussed mid-cap FTSE 250 index declined 1.6%.

ASOS Plc plunged 22.8% as it warned of profit forecast miss after a significant rise in product returns as inflationary pressure impacted its twenty-something customers.

Rival Boohoo dropped 15.1% as it reported an expected fall in revenue in its latest quarter, reflecting higher product returns and a tough year-over-year comparison.

The broader retailers index shed 4.8%.

“This probably throws more potential on the consumer outlook. But analysts earnings forecasts maybe haven’t quite adjusted to the more challenging macro outlook… added to that central banks are in tightening mood pretty much everywhere, which is an unhelpful combination for equity markets,” Ian Williams, economist and strategist at Peel Hunt said.

The British central bank is widely expected to raise Bank rates by a quarter percentage-point to 1.25% in its policy statement due at 1100 GMT.

But investors have put a nearly 50% probability on a half-point rise by the BoE, something it has not done since 1995.

“It’s a toss of a coin for them. Given the Fed’s 75-bps hike that’s going to set a precedent for bigger than usual moves. So a 50-bps increase would not be a big surprise,” Williams added.

Among other stock moves, Informa gained 3.5% after the events organiser more than doubled its share buyback programme and forecast upbeat annual sales and profit outlook.

(Reporting by Devik Jain in Bengaluru; Editing by Shailesh Kuber)