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Consumer companies, rate hike jitters push FTSE 100 lower

© Reuters. FILE PHOTO: A man shelters under an umbrella as he walks past the London Stock Exchange in London, Britain, August 24, 2015. REUTERS/Suzanne Plunkett/File Photo

By Shashank Nayar

(Reuters) -London’s FTSE 100 dropped on Tuesday weighed down by shares of consumer companies and banks, while improving employment conditions in the UK and rising U.S. Treasury yields signalled growing bets of tighter monetary policies.

The blue-chip index fell 0.9%, with consumer-focussed companies such as Diageo (LON:DGE) and Unilever (LON:ULVR), and banks under pressure.

Asian equities and U.S. futures also took a hit after two-year U.S. Treasury yields topped 1% for the first time since February 2020 as investors braced for a U.S. rate rise as soon as March. [MKTS/GLOB]

“The recent swings in the U.S. Treasury have created a flutter in the global financial markets with market participants bracing for the beginning of a tighter monetary policy era, most likely from March 2022,” Kunal Sawhney, chief executive at research firm Kalkine, said.

Meanwhile, data showed British employers added a record 184,000 staff to their payrolls in December, showing little signs of being affected by the impact of the Omicron coronavirus variant.

“Employment data for the quarter to November and the inflation (CPI) data slated to be released tomorrow could become a trigger for the next rate hike in February,” Sawhney added.

The FTSE 100 has outperformed the wider STOXX 600 since the beginning of this year as bets of increased interest rates lifted bank stocks and higher oil prices supported energy shares.

Unilever extended declines from the previous session, and was down 2.8% near a five-year low, as the company signalled on Monday it would pursue a deal for GSK’s consumer business, calling it a “strong strategic fit”.

The domestically focussed mid-cap index fell 1.2%.

THG (LON:THG) dropped 7.9% after the online retail platform warned its adjusted core earnings margin would fall short of market expectations due to adverse currency movements.

Just Group gained 6.3% as the insurer said its retirement income and new business profits grew last year.

Consumer companies, rate hike jitters push FTSE 100 lower

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