British stocks fell on Friday as the growing prospect of aggressive monetary policy tightening coupled with a sharp drop in retail sales in the country raised concerns about economic growth.
The blue-chip FTSE 100 index closed down 1.4% and the mid-cap, domestically focused FTSE 250 index fell 1.3%.
Retailers fell 2.5% as data showed UK retail sales volumes fell more than expected in March compared to February, while consumer confidence approached an all-time low in April, hit by soaring inflation.
“It is increasingly difficult to see consumer spending avoid a slowdown this summer, even if it is only modest by some historical standards,” James Smith, developed markets economist at ING, wrote in a note.
Banks, life insurers and miners fell between 2.2% and 3.0% and weighed on the blue chip index. The FTSE 100 recorded a weekly decline of more than 1%.
“Whether the UK is headed for a recession remains an open question…Despite repeated upside inflation surprises, we believe the Bank of England (BoE) is likely to show more more cautious in rate hikes than markets expect,” Smith added.
BoE Governor Andrew Bailey said on Thursday that the central bank was walking a fine line between fighting inflation and preventing recession, with the strength of the labor market a key issue.
Overnight sentiment was weighed by US Federal Reserve Chairman Jerome Powell saying a half-point interest rate hike would be “on the table” at the next Federal Reserve meeting. Fed.
Among local stocks, B&M fell 6.1% after the discount retailer said its chief executive, Simon Arora, planned to retire next year after more than 17 years at the helm of the company.
Berkeley Group rose 0.4% after Jefferies upgraded the homebuilder’s stock to “buy” from “hold.”
HomeServe Plc jumped 14.9% after saying it was in talks with Canadian firm Brookfield Asset Management over a possible bid for the home repair services company.