UK shares slide after BoE rate hike; ASOS slumps

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A worker shelters from the rain under a Union Flag umbrella as he passes the London Stock Exchange in London, Britain, October 1, 2008. REUTERS/Toby Melville/File Photo

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  • Bank of England raises rates by 25 basis points
  • ASOS's warning spells trouble for retail sector
  • Both FTSE 100 and FTSE 250 down 3.1%

June 16 (Reuters) - London stock indexes fell on Thursday after the Bank of England raised interest rates by an expected quarter percentage point, while a profit warning by online fashion retailer ASOS hit the retail sector.

The blue-chip FTSE 100 index (.FTSE) and the domestically focussed mid-cap FTSE 250 index (.FTMC) both ended 3.1% lower.

The central bank raised rates to 1.25%, the highest since January 2009, and stuck to its more gradual approach as it warned that Britain's economy would shrink in the April-June period. read more

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The 25-basis-point rate rise came against the backdrop of heightened expectations of a bigger hike, especially after the U.S. Federal Reserve increased its key rate by 75 bps, its biggest hike since 1994.

"The Bank of England is playing a game of slowly, slowly catchy inflation, rather than the shock-and-awe tactics being employed across the Atlantic," Laith Khalaf, head of investment analysis, at AJ Bell said.

"Markets will no doubt seize on this as a sign the Bank of England has bottled it, but an incremental strategy allows the rate setting committee to observe more data as it comes in and finetune its approach as circumstances dictate."

Oil major BP (BP.L) and Shell (SHEL.L) slid more than 5.1%,weighing the most on the FTSE 100 index, while the industrial miners (.FTNMX551020) fell 4.2%.

Shares in global companies including Diageo (DGE.L) and British American Tobacco (BATS.L) fell 2.2% and 3.5% respectively, as sterling strengthened on the rate hike news. read more

Rate-sensitive banks (.FTNMX301010) were down 3.8%.

Homebuilder Persimmon (PSN.L) and asset manager Intermediate Capital (ICP.L) slumped 12.0% and 7.6%, respectively, to the bottom of the index as their shares traded ex-dividend.

ASOS Plc (ASOS.L) fell 32.5% and Boohoo (BOOH.L) 11.3% after the online fashion retailers warned of pain from rising product returns as consumers battle inflation and return to pre-pandemic behaviour. read more

The broader retailers index (.FTNMX404010) shed 3.9%.

Informa (INF.L) gained 1.0% after the events organiser more than doubled its share buyback programme and forecast upbeat annual sales and profit outlook. read more

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Reporting by Devik Jain and Amal S in Bengaluru; Editing by Arun Koyyur and Bernadette Baum

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