FTSE 100 loses Wall Street bounce as banks falter

A boost from a bumper day on Wall Street yesterday was not enough to help London’s FTSE 100 finish higher today.

The capital’s premier FTSE 100 index shed 0.44 per cent to close at 7,264.31 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, added 0.61 per cent to reach 19,399.84 points.

A bright day stateside on Tuesday, which saw the Dow Jones and other top indexes post their biggest surge in a month, initially lifted market sentiment in the City and the FTSE 100. 

However, those gains were quickly cancelled out around midday. 

Banks led the premier index lower, suggesting investors were more fearful of the blow surging inflation cooling the UK economy will deal to their bottom lines than the boost they would receive from a big interest rate hike.

Lloyds, HSBC and NatWest all closed down more than one per cent.

Figures published by the Office for National Statistics yesterday revealed inflation hit 9.4 per cent last month, higher than analysts’ expectations of 9.3 per cent. Those figures ramped up bets on the Bank of England launching a 50 basis point rate rise, its biggest since it made independent in 1997.

Higher interest rates tend to help banks by allowing them to charge more for loans. However, lenders tend to perform badly in recessions due to consumers cutting spending.

The pound continued to fall against the dollar despite growing expectations of a historic rate rise. It weakened around 0.18 per cent to buy $1.1969.