The FTSE 100 closed down 0.86% and the FTSE 250 was down 1.73% after another day of uncertainty in Britain’s financial markets.
New data showed that GDP shrank 0.3% in August, a bigger-than-expected figure which stoked fears of Britain entering recession.
The Pound slumped again after Bank of England governor Andrew Bailey suggested that the bailout of the gilts market will end on Friday.
In Washington, Andrew Bailey warned pension funds that they had ‘three days left’ before the bond buy-up ends.
Speaking at an event in Washington, Bailey said, ‘We have announced that we will be out by the end of this week. We think the re-balancing must be done.
‘And my message to the funds involved and all the firms involved managing those funds: You’ve got three days left now. You’ve got to get this done.’
The Bank has supported the bond market for two weeks in the wake of Kwasi Kwarteng’s ‘mini-budget’ amid fears that plummeting prices would create a ‘fire sale’.
Mixed messaging from the Bank helped to spark turmoil in markets – and analysts warned that the pound is likely to hit parity with the dollar by November.
Analysts Jordan Rochester and Yusuke Miyairi at Nomura predicted that Sterling will hit 0.975 by the end of the year.
The analysts wrote, “In our opinion, the main reason why GBP should continue to fall is declining global growth expectations, risk sentiment on the back foot and the UK’s significant current account deficit over winter with the risks of energy blackouts.”
Cybersecurity firm Darktrace (GB:DARK) warned that the unusually strong dollar will hit its revenues for the financial year – and its stock fell 3.7%.
British business news today
Bank of England ramps up gilt buying amid fresh sell-off (FT)
Marks and Spencers to close quarter of bigger shops (Telegraph)
Market fears slow demand for new-build homes (Times)
