Late market roundup: FTSE retreats as hawkish BoE, US tech rout weigh

London's blue-chip index reversed strong early gains to finish lower on Thursday, losing more than 100 points in afternoon trade, as a hawkish interest rate hike from the Bank of England and a sharp sell-off in US technology stocks hit investor sentiment.

The FTSE 100 index closed down 46.55 points, 0.4%, at 10,782.66. It had earlier traded as high as 10,948.24.

The FTSE 250 ended 213.71 points lower, 0.9%, at 24,701.98, and the AIM all-share shed 3.80 points, 0.5%, at 757.09.

The Cboe UK 100 ended down 0.6% at 1,069.54, the Cboe UK 250 closed 0.9% lower at 21,848.44, and the Cboe small companies fell 0.8% to 18,687.95.

In Europe, the CAC 40 in Paris rose 0.3%, while the DAX 40 in Frankfurt declined 0.4%, but it hit a record high earlier.

Stocks in London had earlier made a buoyant start, boosted by the lower oil price, leaving the blue chip FTSE 100 on course to post a new record close. But the gains evaporated amid a sea of red on US trading screens.

Around the time of the London equities close on Thursday, the Dow Jones Industrial Average was down 2.2%, the S&P 500 was 2.9% lower and the Nasdaq Composite slumped 3.7%.

The hefty falls come amid worries that the Democrats will rein in spending on data centres which has fuelled the surge in AI related share prices following their election win.

Chip makers AMD, Nvidia and Intel fell sharply, down 13%, 6.7% and 4.9% respectively. The losses spread to the financial sector with Goldman Sachs down 5.8% and JPMorgan Chase off 3.1%.

Elsewhere Elon Musk's SpaceX shed 7.7% and traded back below its IPO price of USD135 while his electric vehicle business Tesla slumped 8.9%.

In London, Polar Capital Technology Trust and Scottish Mortgage Investment Trust fell 6.6% and 4.8% respectively. Allianz Technology Trust was down 7.1%.

Analysts at ING noted energy affordability shaped the midterms and a "divided government will now face pressure to shield consumers from rising data centre power costs while speeding up new energy supply."

ING thinks there is likely to be tighter data centre regulation, including data centre-related taxes, reduced tax incentives, environmental standards, and requirements for developers to bear relevant cost increases.

Back in London, investors were weighing the first interest rate increase by the Bank of England since August 2023.

The BoE's Monetary Policy Committee voted by 8-1 to raise the bank rate by 25 basis points to 4.00% from 3.75%, as rising energy prices threatened to push UK inflation to around 5.0% by the middle of next year.

Catherine Mann was the sole dissenter, favouring a larger 50-basis-point increase to 4.25%, arguing that a more forceful response was needed to prevent persistent inflationary pressures from becoming embedded in wage and price-setting.

Speaking at a press conference following the decision, BoE Governor Andrew Bailey warned that the longer the conflict persisted, the greater the risk of inflationary pressures becoming embedded in the economy, potentially requiring further interest rate increases.

"These increases should not be seen as the first of an inevitable long sequence of hikes. That is not inevitable. But unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase," Bailey said.

The pound was quoted at USD1.3473 late Thursday afternoon, up from USD1.3464 at the same time on Wednesday. Against the euro, sterling firmed to EUR1.2001 from EUR1.1999.

James Smith, developed markets economist at ING, said: "Every bit of the latest Bank of England decision is more hawkish than expected."

He noted the "two arch-doves" Alan Taylor and Swati Dhingra voted for a hike, the BoE now sees inflation peaking at 4.9%, "above our own and indeed most other economist's predictions", and "some – though not all – officials are more forthright than we'd expected about a probable need to tighten policy further."

"This all validates our call for the Bank of England to hike rates again in February – and December is clearly in play too," Smith said.

But Deutsche Bank Chief UK Economist Sanjay Raja doesn't think this is the start of a long hiking cycle and with signs of second-round effects on inflation remaining "minimal" at this juncture, retains his view for one more hike with bank rate peaking at 4.25%.

"Today's hike merely adds a dose of policy restriction to an already restrictive policy stance. Moreover, with financial conditions having tightened materially since March, the case to go much further isn't as strong as it may have been in the bank's previous hiking cycle back in 2022," he argued.

Peel Hunt Chief Economist Kallum Pickering thinks four things will decide the near-term path for bank rate: the strength of economic activity in the UK, the course of the war in the Middle East; developments in services prices; and private regular pay growth.

"Markets currently price in a 51% chance of a further hike in December. In our view, that de facto coin-toss call probably correlates just as well with markets' assessment of whether the US-Iran war will yield a positive breakthrough," he said.

Hopes for peace between the US and Iran have increased in the wake of the Democrat Party's midterms success, with leading Republicans blaming the war, and the impact on energy prices, for their defeat.

Brent oil was trading at USD97.34 a barrel on Thursday, lower than USD99.00 late Wednesday.

The euro was higher at USD1.1228 from USD1.1222 late Wednesday. Against the yen, the dollar was lower at JPY157.84 from JPY158.45.

The yield on the US 10-year Treasury was quoted at 4.84% late on Thursday afternoon, narrowed from 4.92% on Wednesday. The yield on the US 30-year Treasury was at 5.25%, narrowed from 5.31%.

Gold prices moved higher driving gains in Endeavour Mining, up 6.2%, the best performer on the FTSE 100.

Gold was quoted at USD4,116.08 an ounce Thursday, higher than USD4,041.83 on Wednesday.

Elsewhere, a barrage of earnings and trading updates provided direction.

Among the winners, Diageo, up 3.2%, reiterated full-year guidance as it reported a stronger-than-expected quarter as a decline in sales in North America proved less than feared.

The London-based brewer and distiller, which owns brands including Guinness stout and Johnnie Walker whisky, said net sales grew 1.2% to USD4.93 billion in the quarter ended September 30 from USD4.88 billion the year prior.

Organic sales growth was 1.4% but this was partly offset by unfavourable foreign exchange and the impact of disposals.

Revenue beat Visible Alpha consensus of USD4.84 billion and organic growth confounded expectations for a 0.4% decline.

Retailer Next rose 2.5% as it kept its annual profit guidance unchanged despite a faster-than-expected rise in full-price sales in the third quarter, led by its international business.

Next reported an 8.1% increase in full-price sales in the 13 weeks to October 31, ahead of its previous guidance for 5.8% growth, driven by stronger-than-expected international trading.

International online sales rose 32%, well above Next's forecast of 21% growth, while UK full-price sales increased 2.0%, in line with expectations, despite unseasonably warm weather weighing on September trading.

In the red, Coca-Cola HBC plunged 18% after Russian business daily Kommersant reported that the Altai-based beverage company Bochkari has requested that Multon and Multon Partners be placed under an external management regime.

Multon is owned by Coca-Cola HBC. JPMorgan noted the news echoes what "we have seen for other consumer goods companies in Russia, most recently Nestle in European staples, for whom there were August headlines that a local company had asked the government to impose temporary management over their Russia operations, which was followed in September by these being placed under temporary administration."

JPM estimates Coca-Cola HBC's Russian business accounts for around 14% of volumes and low-to-mid 20s percent of group earnings before interest and tax.

The biggest risers on the FTSE 100 were Endeavour Mining, up 235.00p at 4,013.00p, Airtel Africa, up 10.60p at 289.20p, Diageo, up 57.50p at 1,871.50p, Imperial Brands, up 84.00p at 3,062.00p and Next, up 385.00p at 15,990.00p.

The biggest fallers on the FTSE 100 were Coca-Cola HBC, down 882.00p at 4,052.00p, Metlen Energy & Metals, down EUR4.32 at EUR44.56, Polar Capital Technology Trust, down 38.50p at 543.00p, BAE Systems, down 107.50p at 1,880.50p and Scottish Mortgage Investment Trust, down 72.50p at 1,434.00p.

Friday's global economic events calendar sees the US jobs report, including nonfarm payrolls figures, Canada unemployment, eurozone retail sales and the Lloyds house price index in the UK.

Friday's local corporate calendar has a trading statement from online property portal Rightmove.

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