London stocks slide amid economic “tug-of-war”

By Johann M Cherian

(Reuters) -UK’s FTSE 100 tumbled on Wednesday, dragged by banks, oil majors and mining stocks, while sentiment was further dented as two major global organisations strongly criticised the government’s tax cuts.

The blue-chip index dropped 1.6%, while the more domestically oriented FTSE 250 shed 2.5%.

The energy and mining sectors slid 1.4% and 1.1%, respectively, as a strengthening dollar weighed on metal prices, while crude prices were further hurt by supply cuts due to Hurricane Ian. [O/R] [MET/L]

Rate-sensitive banking stocks declined 4% after the Bank of England said it would undertake ‘significant’ policy moves only in November in light of the market turmoil, according to analysts.

The International Monetary Fund (IMF) and ratings agency Moody’s criticised Britain’s new economic strategy, with the latter warning that unfunded UK tax cuts would be “negative” for the country’s credit standing.

“There is an economic tug-o-war taking place between the Bank of England and the government,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“The IMF criticism is based on the possibility that the actions by the government will fuel inequality within the UK on worries that UK is fast taking on the characteristics of an emerging market economy.”

Retailers slid 3.3%, with online fashion retailer Boohoo slumping 9.2% to its lowest in 7 years after it cut its full-year outlook, blaming a worsening macro-economic and consumer backdrop.

“Even before the recent drop in sterling will start to make imports more expensive for customers, they are already starting to tighten their belts and that is going to take a toll on retailers going forward”, Streeter added.

Burberry Group rose 4.1% after announcing Daniel Lee would be its new chief creative officer, replacing Riccardo Tisci, who is stepping down.

(Reporting by Johann M Cherian in Bengaluru; editing by Uttaresh.V and Savio D’Souza)