London’s flagship FTSE 100 index fell sharply on Tuesday, dropping 0.7% to its lowest level since June 12 as global markets retreated on growing interest rate concerns.
The midcap FTSE 250 suffered an even steeper decline, falling 1.8% to its lowest point since June 10 as risk appetite evaporated across the board.
Under new US Federal Reserve chair Kevin Warsh, traders are now pricing in around two 25 basis point hikes by year-end, up from one earlier this month.
Markets are also pricing in at least one 25 basis point hike from the Bank of England in December, according to data compiled by LSEG.
Heavy-weight precious and industrial metal miners bore the brunt of the sell-off, with both sectors falling around 5% as gold, silver, and copper prices slid.
Antofagasta dropped 6.5% while Fresnillo (FRES.L) declined 5.6%, making the two miners among the worst performers on the London market on Tuesday.
Not all sectors suffered, however, with healthcare, pharma, and consumer staples each rising over 1% as investors rotated into defensive positions.
UK leadership uncertainty added another layer of anxiety for investors following Prime Minister Keir Starmer’s resignation on Monday, with attention now firmly on his likely successor.
Andy Burnham is widely expected to take the top job after former health minister Wes Streeting said he would endorse Burnham rather than mount his own leadership bid.
Investors are closely watching Burnham’s fiscal policy position at a time when public debt has soared to nearly 100% of economic output, a burden that had complicated the work of six prime ministers before Starmer.
Adding to the gloomy picture, data showed the services sector contracted at its fastest rate in nearly three-and-a-half years during June, deepening concerns about the health of the UK economy.
Business supplies distributor Bunzl provided a rare bright spot, gaining 3% after raising its annual revenue growth outlook following a strong first half supported by robust demand in North America and some price hikes.
Telecom Plus tanked 24% after announcing a five-year investment plan that will slash near-term profits as the UK utility group responds to intensifying competition in its market.