London stocks faced a downward trend at the opening of the market on Thursday, as investors contemplated the possibility of the Bank of England implementing interest rate hikes that could

surpass earlier expectations. This concern arose in response to the persistently high inflation data.

At 0711 GMT, the benchmark FTSE 100 index, represented by .FTSE, experienced a 1.0% decline, reaching a three-week low, while the mid-cap index FTSE 250, denoted by .FTMC, recorded a 0.7% drop.

The healthcare sector, represented by .FTNMX201030, as well as the miners sector, represented by .FTNMX551020, and the banks sector, represented by .FTNMX301010, exerted the most significant downward pressure on the FTSE 100, with each sector declining by over 1%.

Traders' expectations regarding the Bank of England's decision later in the day were almost equally divided between a 25 basis point (bps) and a 50 bps rate hike. This division emerged after Wednesday's release of data that defied predictions of a slowdown, with inflation holding steady at 8.7% in May. The data further revealed that underlying inflation has reached its highest level since 1992, prompting increased speculation of further rate hikes.

Investors expressed concerns about the Bank of England's ability to effectively address inflation through swift rate increases without triggering a recession.

In the meantime, U.S. Federal Reserve Chair Jerome Powell's congressional testimony hinted at the likelihood of additional rate hikes to counteract inflation, influencing market sentiment. Photo by Kaihsu Tai, Wikimedia commons.