FTSE 100 close: London index slips ahead of Bank of England interest rate decision as Next jumps

London’s FTSE 100 slipped today ahead of a huge week for the UK economy, pushed lower by a resurgent pound knocking sentiment toward Britain’s biggest companies.

The capital’s premier index fell 0.71 per cent to 7,588.49 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, lost nearly one per cent to trade below the 19,000 point mark.

Shares in the UK’s top blue chips suffered losses this morning which analysts attributed to pound sterling strengthening sharply against the globe’s top currencies. The currency is up nearly six per cent against the US dollar since the beginning of the year.

A large chunk of FTSE 100 listed companies generate their income overseas, so when the pound strengthens, it knocks the amount of money they can earn from exchanging foreign currencies for the pound.

Financial markets reckon the Bank of England will send borrowing costs to at least 5.75 per cent, a level not seen in 16 years, putting upward pressure on the pound.

“The news has underpinned a more recent rally for sterling, which has had the unintended consequence of undermining the progress of the premier index,” Richard Hunter, head of markets at fund manager interactive investor, said.

“The FTSE 100, with its estimated 70 per cent exposure to overseas earnings, has seen the value of those revenues lessen progressively on repatriation, with the index now ahead by just two per cent in the year to date,” he added.

Industrial giants led losses on the premier index, with miners Antofagasta and Anglo American down more than two per cent.

UK-focused interest rate sensitive stocks also softened. Housebuilders Persimmon and Taylor Wimpey traded near the bed of the FTSE 100 ahead of an expected 13th straight interest rate rise by the Bank on Thursday.

Bank Governor Andrew Bailey and the rest of the monetary policy committee are poised to back a 25 basis point increase, sending rates to 4.75 per cent. Fresh inflation numbers on Wednesday are expected to show the cost of living is still historically high at more than eight per cent.

High street stalwart Next climbed nearly five per cent and to the top of the FTSE 100 after it said customers refreshing their wardrobes in response to the hot weather is set to raise its profit and revenues beyond what it previously expected.

Oil prices slimmed around 0.8 per cent.