Interest rate hike sees Footsie plummet

The Bank of England’s first move on interest rates in a year sent leading shares into freefall today as the FTSE 100 Index slumped by almost 2%.

The Bank said the quarter of a percentage point increase to 4.75% was aimed at curbing inflationary pressures, but it still dealt a blow to the market.

The FTSE 100 Index traded down 93.7 points to stand at 5838.4 at the close, with housing and retailing stocks suffering the biggest blows.

Housebuilder Persimmon edged towards the top of the fallers board – its shares plummeted 4% or 52p to 1242p – as the rate rise fuelled fears of a slowdown in the property market.

A similar hit was taken by second-tier stock Countrywide – the UK’s biggest estate agency – dropping 34p to 387p while housebuilders Barratt and George Wimpey were down 50.5p at 945p and 22.5p at 466p respectively.

The rate rise also prompted fears of a slowdown in consumer spending with retailer Kingfisher, which owns B&Q, falling 7.75p to 236.5p and Marks and Spencer down 17.5p at 580p.

Lenders were also under pressure with Halifax Bank of Scotland off 30p at 959p, with Alliance & Leicester feeling the pinch at 995p – a drop of 36p or 3%.

Barclays started the day on the up after announcing pre-tax profits had increased by 37% to £3.67 billion. However, the Bank of England announcement hit the share price and it lost 8.5p to 619p.

Shares in Unilever suffered the biggest blue-chip fall of the day as investors appeared concerned at a warning of tough sales conditions in the UK and Europe. Despite the firm reporting a 16% rise in profits, the shares fell 75p to 1214p.

Chemicals business ICI also took a tumble with shares lowering 14.25p – or 4% - to 363p, despite the company announcing a 12% rise in first half profits. Concern over margins is likely to have driven the share price fall.

Four top flight stocks managed to trade in positive territory with supermarket group Morrison reporting like-for-likes sales up 6.1% in recent weeks as the retailer began to put recent problems integrating Safeway behind it. The stock gained 7.25p to 213p.

It was closely followed by ITV, which made further gains amid reports of fresh takeover talk and suggestions the channel’s chief executive Charles Allen could be poised to step down at the beleaguered broadcaster. The shares lifted 2.75p to 104.25p.

Meanwhile, Party Poker owner PartyGaming traded up after announcing the purchase of online betting group Gamebookers for 102 million euros (£69.6m).

The firm has struggled amid regulatory concerns over online betting in the US, but saw shares build 0.5p to 110p following news of the acquisition.

Outside the top flight, H Samuel owner Signet was buoyed 15.25p – or 15% – to 116.75p following takeover speculation and positive second quarter figures.

And investors welcomed acquisition news from engineering firm GKN, as well as a 9% rise in pre-tax profits, to help the stock climb 14.75p to stand at 277.25p.

The biggest blue-chip risers were Morrisons up 7.25p at 213p, ITV ahead 2.75p at 104.25p, BT up 3.75p at 240p and PartyGaming ahead 0.5p at 110p.

The top fallers were Unilever down 75p at 1214p, Liberty International off 49p at 1104p, Corus down 17p at 398p and Persimmon off 52p at 1242p.