UK shares dropped, tracking a fall in global equity markets after minutes of the U.S. Federal Reserve’s meeting showed the central bank‘s hawkish stance toward interest rate hikes as it looks to tame high inflation. The FTSE 100 ended 0.9% lower. This is with industrial and healthcare stocks being the top drags, down 2.6% and 1.3% respectively. Global equities sold off after it emerged that U.S. central bank policymakers said that a very tight job market and unabated inflation might require the Fed to raise interest rates sooner than expected.
Banking stocks has gained 2.1% as UK 10-year yields rose. This is fuelled by rate hike expectations. Oliver Blackbourn, portfolio manager at Janus Henderson Investors said that if you are looking for a value play at the moment, the UK is quite attractive. It tends to do well in these sorts of environments because of factors like its currency which tends to be sort of risk-on and also the mix of sectors in the UK market today is really helping.
The FTSE 100 had gained 14.3% in 2021. This is by lagging European and U.S. peers. Blackbourn said that he expects UK stocks to start catching up as markets move toward more value-oriented segments from growth sectors such as technology. The domestically focussed mid-cap index declined 1.5%, with travel and leisure stocks falling 1.6%. Britain’s services sector grew at the slowest pace since the country was last in lockdown. This is because of the spread of the Omicron variant of the coronavirus hammered hospitality and travel.
Three leading British retailers Next, Greggs, and B&M underscored the threat they face from inflation this year. Their bosses are battling to remain competitive as consumer finances come under pressure and prices surge. Dr. Martens slumped 10.7%. And, that is after bookrunner Goldman Sachs International said that the Permira Funds sold about 65 million shares of the boot maker. Food-to-go retailer Greggs fell 8.0% after saying surging cases of Omicron were putting pressure on its store staff. This is though it was manageable from a business perspective.