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FTSE 100 close: London markets fall as central banks take centre stage again

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Over the course of the week it has gained 2.7 per cent, its strongest performance all year.
Over the course of the week it has gained 2.7 per cent, its strongest performance all year.

London markets closed lower on Monday ahead of a busy week for central banks.

The bluechip FTSE 100 index was trading 0.8 per cent lower at 7,647.15 while the midcap FTSE 250, which is more aligned with the health of the domestic economy, dropped 1.8 per cent to 18,461.04.

Markets were in a watchful mood as traders anticipated decisions from the US Federal Reserve, Bank of England and Bank of Japan later this week.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, expected that the Fed would leave rates on hold on Wednesday despite a recent uptick in inflation.

“The interest rate hike medicine has been working, and they won’t want to administer more than necessary in fear of prompting unnecessary side effects across the economy,” she said.

In contrast, the Bank of England is expected to hike rates once again although Streeter said the decision could well be the last in the cycle.

“The September rate decision may well mark the end of the hiking cycle, given that unemployment has also ticked up, companies are showing more reluctance to hire staff and we have still yet to feel the full effect of previous rate increases,” she commented.

On the FTSE 100, insurer Phoenix fell over two per cent despite beating City estimates in its most recent results.

In its half year report, Phoenix said its new business long-term cash generation, a key measure of future profitability, surged 106 per cent to £885m from £430m.

Its shares were down 2.3 per cent.

The FTSE 100’s top risers were Mondi, which climbed 3.4 per cent and Ocado, which rose 3.0 per cent.

Elsewhere shares in Martin Sorrell’s digital advertising firm S4 Capital fell 25 per cent after the company downgraded its outlook.

“We had a very mixed first half of the year reflecting challenging global macroeconomic conditions and consequent fears of recession, which resulted in client caution to commit and extended sales cycles, particularly for larger projects,” Sorrell said.

Pendragon shares were given a lift after it agreed to sell its UK motor business to Lithia Motors for £250m. Its shares closed up 27 per cent.