Bailey’s hawkish tilt drags FTSE 100 down

London’s FTSE 100 dipped during the moring session today driven by investors sentiment souring on governor of the Bank of England Andrew Bailey signalling rate hikes will come sooner than expected.

The capital’s premier index lost 0.40 per cent to fall to 7,035.23 points during the first hour of exchanges.

In a speech last night, Bailey said the Bank may have to raise rates if inflation continues to surge, but indicated the economy is currently not strong enough to absorb tighter policy. Annual consumer price inflation, according to the Office for National Statistics, is currently running at 3.2 per cent.

The Old Lady upped its inflation forecast for the year at its monetary policy committee meeting last week to above four per cent by the end of the year, more than double its target.

Stock prices tend to fall under tighter policy due to traders and financial institutions having less fire power to deploy in capital markets.

Travel stocks led losses on the blue-chip index this morning, with British Airways parent company IAG and aerospace engineer Rolls-Royce sliding three per cent and 3.66 per cent respectively.

Rolls led the gains on the FTSE yesterday after investors took the news of it selling its Spanish arm off well.

Travel stocks weighed heavily on the mid cap FTSE 250 as well. Airlines Easyjet and Whizz AIr slipped more than 3.40 per cent.

Strong performances among oil majors offset losses on London markets this morning. BP and both Royal Dutch Shell listings lined the top of the risers column, driven higher by oil prices topping $80.

Russ Mould, investment director at AJ Bell, said: “Shell and BP are among the biggest constituents of the FTSE 100 and so their share price performance has considering weighting on the direction of the overall index.”

The pound lost ground on the greenback, weakening 0.23 per cent to $1.3663.