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UK Stocks Slip on Renewed U.S. Rate-Hike Worries

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UK Stocks Slip on Renewed U.S. Rate-Hike Worries

UK stocks extended their decline on Thursday following stronger-than-expected U.S. economic data, which rekindled concerns that interest rates would stay higher for longer. However, aerospace supplier Melrose Industries saw its shares rise on an upbeat profit outlook.

The blue-chip FTSE 100 index dipped 0.1% by 0815 GMT, marking its fourth consecutive session in the red. Wall Street’s main indexes also tumbled on Wednesday after data revealed that the U.S. services sector unexpectedly gained steam in August, indicating persistent price pressures.

Craig Erlam, senior market analyst at OANDA, commented on the situation, saying, “ISM (services sector data) number perhaps just plays into people’s figures that inflation will struggle with that last leg to 2%, which will mean that rates don’t go higher, but they do stay higher for longer.”

Investors are now eagerly awaiting the monetary policy meetings of the European Central Bank, the Bank of England, and the Federal Reserve later this month, hoping for signs that the global tightening cycle may be coming to an end.

The exporter-heavy FTSE 100 was further weighed down by data showing that China’s exports and imports fell in August due to sagging overseas demand and weak consumer spending.

Commodity-related stocks, including metal miners, took a hit, with a 1.8% decline leading the sectoral decline.

On the individual stock front, cardboard maker DS Smith and insurers Admiral and Prudential saw their shares fall between 0.7% and 2.2% as they traded ex-dividend.

However, Melrose Industries saw its shares rise by nearly 8% after the company raised its annual profit expectations. The increase was attributed to higher-than-anticipated margins in its engines division.

The mid-cap FTSE 250 index also experienced a decline, falling 0.3% due to a 31.4% plunge in shares of polymer maker Synthomer. The company forecasted no recovery in customer demand before the end of this year. Additionally, oil producer Energean saw its shares drop by 1.5% after trimming its annual output forecast.

In more positive news, motor and home insurer Direct Line Insurance Group announced that it expects better operating profit in 2024 as premium prices increase. This news sent the company’s shares up by 14%.

As the UK stock market continues to respond to global economic factors, investors remain cautious about the impact of interest rate decisions and international trade on UK businesses. The coming monetary policy meetings are expected to provide further insight into the future direction of interest rates and global economic trends.

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