Central bank rate hike worries weigh on FTSE 100 after strong GDP results

(Reuters) – London’s FTSE 100 index fell on Wednesday as signs of economic growth bolstered early rate hike bets, although gains in homebuilder stocks led by strong earnings in Barratt Developments helped limit losses.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Photo

Homebuilders jumped 3%, their highest intraday gain since September 2020, with Barratt Developments PLC leading the pack, up 4.1%, after reporting sales above pre-pandemic levels and announcing it was on track to deliver its 2022 and medium-term targets.

“The housebuilders have found themselves in somewhat of a sweet spot. While pent-up lockdown demand is starting to wane, people are still motivated to move and that’s driven house prices higher. According to Barratt, that’s been enough to offset build cost inflation,” said Laura Hoy, an analyst at Hargreaves Lansdown.

The blue-chip FTSE 100 index eased 0.4% at 0815 GMT, with miners and oil stocks leading declines, while a stronger pound, up 0.4%, also weighed on the export focussed index.

Britain’s economy returned to growth in August after contracting for the first time in six months in July, keeping intact financial market bets the Bank of England will begin raising interest rates before the end of the year.

The BoE, facing a jump in inflation, looks set to be the first major central bank to raise interest rates since the beginning of the pandemic. Investors are betting on a rise to 0.15% by December. [BOEWATCH]

The FTSE 100 has risen about 10% so far this year on accommodative central bank policies, but is nearly 9.6% away from its all-time highs to significantly underperform the wider European aggregate which sits only 3% below its record levels.

The domestically focussed mid-cap index rose 0.6%, with travel and leisure stocks leading gains.

UK fund manager Man Group rose 6.9% and was the top gainer after its assets under management rose to a record $139.5 billion in the third quarter.

In volatile trade, SoftBank-backed online retailer THG dropped 0.7% as of 0825 GMT, extending losses after it held a presentation on Tuesday to reassure investors it could reverse a recent slide in share price.

Just Eat Takeaway shares declined 4.6% to its lowest since February 2019 after its third-quarter orders failed to meet analyst expectations.

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