By Sukriti Gupta
(Reuters) -UK shares closed lower on Tuesday, pushed down by rate-sensitive banks, industrials and utility stocks on mounting investor concerns about public finances.
The blue-chip FTSE 100 closed 0.9% lower, while the domestic-focused midcap index fell 2.2%. Both logged their worst day in nearly five months.
Britain’s 30-year borrowing costs rose to their highest levels in over 27 years, while sterling slid more than 1.5% [GBP/], amid investor anxiety about the UK’s ability to get its finances under control.
Thirty-year gilt yields rose to 5.72%, their highest since May 1998.
Prime Minister Keir Starmer on Monday reshuffled his top team of advisers, to bolster economic expertise before a budget later this year that is expected to include further tax rises, but also sparking headlines that the move had weakened finance minister Rachel Reeves.
“There’s a feeling that the government doesn’t really have a solution …they’ve been floating different ideas about how to fill the budget deficit (but) don’t seem to have a concrete plan,” said Nick Saunders, CEO of investment platform Webull.
“Coupled with the sort-of-a cabinet reshuffle in London … there’s a worry that the chancellor is on her way out.”
Heavyweight banking stocks, which had marginally rebounded in the previous session after Friday’s declines, fell on the day. NatWest, Barclays and Lloyds were down about 2% each.
They had fallen on Friday after a think-tank recommended a new tax on lenders as a possible way for Reeves to raise revenue.
The real estate sector declined, with Segro down 3.9%. Utility stocks fell, with SSE losing 3.7%.
Insurers Legal & General and Phoenix fell over 4% each.
Retailers and consumer groups such as Tesco, M&S and British American Tobacco also declined.
Travel and leisure stocks fell. British Airways owner IAG was down 3.3% and Whitbread lost 4.5%.
Aerospace and defence companies also fell, with Rolls-Royce down 2.9%.
Conversely, the energy sector added 0.5%, tracking higher oil prices. [O/R]
The healthcare sector rose 0.2%. Precious metal miners advanced, tracking higher gold prices, with Fresnillo up 5.2%. [GOL/]
In company news, Ithaca Energy fell 13.3%, to the bottom of the mid-cap index, after its two largest shareholders sold a stake of about 3% at a discount.
Oxford Nanopore Technologies fell 12.8% on keeping full-year guidance unchanged, despite expectations of an upgrade.
(Reporting by Sukriti Gupta; Editing by Vijay Kishore and Kevin Liffey)
