UK stocks fall as hawkish Fed triggers global sell-off

By Bansari Mayur Kamdar

(Reuters) -UK shares dropped on Thursday, tracking a fall in global equity markets after minutes of the U.S. Federal Reserve’s December meeting showed the central bank’s hawkish stance toward interest rate hikes as it looks to tame high inflation.

The FTSE 100 ended 0.9% lower, with industrial and healthcare stocks being the top drags, down 2.6% and 1.3% respectively.

Global equities sold off after it emerged that U.S. central bank policymakers said in their meeting last month that a “very tight” job market and unabated inflation might require the Fed to raise interest rates sooner than expected.

Banking stocks gained 2.1% as UK 10-year yields rose, fuelled by rate hike expectations.

“If you’re looking for a value play at the moment, the UK is quite attractive,” said Oliver Blackbourn, portfolio manager at Janus Henderson Investors.

“It tends to do well in these sorts of environments because of factors like its currency which tends to be sort of risk-on and also the mix of sectors in the UK market today is really helping.”

The FTSE 100 gained 14.3% in 2021, lagging European and U.S. peers, but Blackbourn said he expects UK stocks to start catching up as markets move toward more value-oriented segments from growth sectors such as technology.

The domestically focussed mid-cap index declined 1.5%, with travel and leisure stocks falling 1.6%.

Britain’s services sector grew in December at the slowest pace since the country was last in lockdown, as the spread of the Omicron variant of the coronavirus hammered hospitality and travel, a survey showed.

Three leading British retailers Next, Greggs, and B&M on Thursday underscored the threat they face from inflation this year, with their bosses battling to remain competitive as consumer finances come under pressure and prices surge.

Dr. Martens slumped 10.7% after bookrunner Goldman Sachs International said Permira Funds sold about 65 million shares of the boot maker.

Food-to-go retailer Greggs fell 8.0% after saying surging cases of Omicron were putting pressure on its store staff, though it was manageable from a business perspective.

(Reporting by Bansari Mayur Kamdar and Amal S in Bengaluru; Editing by Subhranshu Sahu, Vinay Dwivedi, Elaine Hardcastle)