FTSE slips on oil and interest rate fears

The London stock market took a battering today as jitters over higher interest rates and oil prices took their toll.

By mid-afternoon the FTSE 100 Index had fallen 44 points to 4427.8 – lower than the level at which it started the year.

Speculation about the possibility of a UK interest rate rise next month emerged after retail sales figures again showed a month-on-month increase, albeit at a slower rate.

Analysts said the figures increased the chances of another rise in the cost of borrowing, which would make shares less attractive to investors.

Sky-high oil prices were also fuelling concerns, moving back near their all-time high following a temporary fall.

The Centre for Economics and Business Research warned this week that oil prices could cut 0.7% off global GDP next year and build inflationary pressures leading to higher interest rates.

Tom Hougaard of City Index said: “There is really not a lot to suggest oil is going to come down from here. The stock market is very jittery about the whole thing.”

Today’s slump is the latest in a series of hits to the market. Just 10 days ago soaring oil prices caused the Footsie to slip below the key 4400 level – and any gains since then have proved short-lived.

Within the FTSE 100 Index just a handful of stocks were in positive territory. They included brewer SAB Miller, which today revealed an 81% rise in full year profits, and telecoms group BT, which also delivered a positive update.

But most other companies were in downbeat form, including British Airways, which has been forced to raise the price of tickets due to high oil prices.

Mining stocks were in the doldrums after featuring among the star performers of yesterday’s session, while all the financial stocks were in the red.

Despite the high oil prices, heavyweight companies BP and Shell were also in negative territory.