London stocks fall as rate hike bets weigh on miners and midcaps

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London stocks fall on rate hike bets

Highlights

FTSE 100 drops 0.7% and FTSE 250 falls 1.8% by 0919 GMT, reaching lowest levels since mid-June as market sentiment worsens.
Precious and industrial metals miners decline about 5% with Antofagasta down 6.5% and Fresnillo off 5.6% amid falling gold, silver and copper prices.
Traders now price in around two 25 basis point U.S. Federal Reserve hikes by year-end and at least one Bank of England hike in December, intensifying rate concerns.

Market declines deepen as miners slide

As reported by Reuters, the FTSE 100 falls 0.7% to its lowest level since June 12 by 0919 GMT, while the FTSE 250 drops 1.8% to its weakest level since June 10 as global market sentiment deteriorates.

Heavyweight precious and industrial metal miners lead the declines, each sector falling about 5%. Antofagasta loses 6.5% and Fresnillo drops 5.6% as gold, silver and copper prices slide.

Traders are largely pricing in around two 25 basis point rate hikes by year-end under new U.S. Federal Reserve Chair Kevin Warsh, up from one earlier this month. Markets also see at least one 25 basis point increase by the Bank of England in December, according to data compiled by LSEG.

Defensive areas of the market move higher against the broader downturn. Healthcare, pharma and consumer staples each rise more than 1% as investors rotate toward sectors seen as more resilient in periods of economic uncertainty.

Leadership contest and company updates shape sentiment

British politics remains a key theme after Starmer's resignation on Monday. His rival Andy Burnham is widely expected to succeed him after former health minister Wes Streeting, previously considered a leading contender, says he will endorse Burnham.

Investors are focused on Burnham's fiscal policies at a time when public debt has climbed to nearly 100% of economic output, adding to concerns over the policy backdrop. Separate data also shows the services sector contracts at the fastest pace in nearly three-and-a-half years in June.

Among individual stocks, business supplies distributor Bunzl gains 3% after raising its annual revenue growth outlook following a strong first half, helped by robust North American demand and some price increases. Telecom Plus plunges 24% after saying its five-year investment plan will cut near-term profits as the UK utility group responds to intensifying competition.

In our earlier article on the Labour leadership transition after Keir Starmer’s resignation, we explained how Andy Burnham’s rise as the likely next prime minister put investors’ focus back on fiscal discipline. We noted that gilt yields and sterling were still reflecting caution shaped by memories of the 2022 gilt turmoil, meaning Burnham would need to demonstrate credibility through policy choices and key appointments rather than rhetoric alone.

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