FTSE 100 dips as investors mull BoE’s hawkish tilt

London’s FTSE 100 dipped during afternoon exchanges today driven by investors fearing the Bank of England’s hawkish tilt could be a looming headwind for markets.

The capital’s premier index dropped 0.22 per cent to 7,062.47 points heading into the final session of the week. Retail and property stocks led the blue-chip index lower today.

The FTSE is still on track to end the week in positive territory.

Although the Bank of England kept rates unchanged at a record low 0.1 per cent and voted to maintain its bond buying programme, it did provide the strongest signal yet that a tightening of monetary policy is imminent.

The Old Lady acknowledged the UK economy’s rebound from the pandemic had strengthened the case for “some modest tightening of monetary policy.”

Further evidence showing the economy is on a positive trajectory had emerged since the MPC’s last meeting, it said.

Stocks valuations tend to fall as monetary policy tightens as investors and financial institutions have less ammunition to deploy in stock markets.

“What we can probably gleam from this is that we will start to see the hawks voting for interest rate rises fairly soon, and potentially as soon as November,” said James Smith, developed markets economist at ING.

Winners and losers

Housebuilders Barratt Developments and Taylor Whimpey, alongside property search site Rightmove, all lurched into the red this afternoon, sliding more than 1.70 per cent. Rightmove was the worst performer on the blue-chip index.

Aerospace engineer Rolls Royce topped the risers column, climbing 5.40 per cent. Astrazeneca was the second best performer on the FTSE, rising 2.80 per cent. 

The mid-cap FTSE 250 was down sharply today, dropping 0.81 per cent, dragged down by Cambridge-based cybersecurity firm Darktrace plummeting 7.67 per cent.

Around the world

Asian shares posted strong performances in overnight trading, indicating market fears about the fallout of indebted property developer Evergrande are receding.

Japan’s Nikkei climbed 2.06 per cent. However, Hong Kong’s Hang Seng slid 1.30 per cent.

European stocks were a wall of red today. The Dax 30 and pan-Europe Stoxx 600 dropped 0.70 per cent and 0.74 per cent respectively heading into the last stages of the week.

Wall Street’s main benchmarks opened down today.