London close: FTSE slumps as investors mull central bank announcements

(Sharecast News) - London stocks fell sharply on Friday as investors mulled rate decisions this week from the Federal Reserve, the Bank of England and the Bank of Japan.

The FTSE 100 closed down 1.5% at 10,659.13, but still eked out a gain for the week, while Brent crude was down 0.5% at $104.29 a barrel and West Texas Intermediate was 0.5% lower at $101.43.

Andrew Melville, head of research at Block Scholes, said: "Wednesday's decision by the FOMC to raise rates by 25bp for the first time since 2023 was taken as more hawkish than expected, despite markets pricing in a 90% chance of the hike before the event. While Chair Warsh's comments in the press conference showed him toeing his own line of minimal forward guidance, he faithfully rendered the views of the other 18 FOMC participants of further monetary policy tightening in the remaining two meetings of 2026.

"The Fed's move was soon followed by a similarly sized hike from the BoJ, who raised policy rates by 25bp after public pressure from US Treasury Secretary Scott Bessent to 'do the right thing'. However, the Fed and BoJ hikes are not as similar as they seem at first glance - where the FOMC's decision was unanimous, the BoJ's faced two dissenters. While the Fed's Summary of Economic Projections indicated further hikes before year end, BoJ chief Ueda described the move as 'preemptive', stating 'that the BOJ aims to act preemptively to avoid being forced into large moves `that could unsettle financial markets.' The yen has sold off against the dollar over the past five days, returning to early-September levels and making a stronger case for continued intervention in the yen."

On Thursday, meanwhile, the Bank of England held interest rates at 3.75% as widely expected, for the sixth meeting in a row.

The Monetary Policy Committee voted by a majority of 6-3 to keep rates on hold, with the three dissenters - Megan Greene, Catherine Mann and Huw Pill - favouring a 25 basis points hike.

The BoE also confirmed that it would pause government bond sales for the next six months and halt sales of long-dated gilts entirely.

Investors were also mulling figures from the Office for National Statistics, which showed that retail sales unexpectedly bounced back in August.

Sales rose 0.5% on the month following a 0.5% decline in July, beating expectations for a 0.2% fall. On the year, sales were 2.4% higher in August.

In the three months to August, sales were up 0.9%, the ONS said, with warm weather lifting sales of items such as fans and air conditioning units, and retailers also benefitting from sales of sports merchandise and clothing.

ONS senior statistician Jon Gough said: "Retail sales increased in the latest three months, with a particularly strong June for online outlets helping to boost their sales across the period. Food store sales also rose, with supermarkets doing well in July and August.

"Meanwhile, retailers selling alcohol and beverages performed well across all three months, which they attributed to promotions, the hot weather and the World Cup."

In equity markets, Airtel Africa tumbled following a report that Airtel Money is considering raising less money than previously sought in its initial public offering. According to Bloomberg, which cited people familiar with the matter, the money transfer and payments company's IPO is now expected to raise at least $800m, down from a previously targeted size of $1.5bn to $2bn as reported by Bloomberg in April.

Sources told Bloomberg that Airtel Money is now considering a valuation of $8bn to $9bn to align with technology stock valuations, lower than the $10bn sought previously. The firm's valuation in the offering was reduced following feedback from investors, according to Bloomberg.

Airtel Money is part of Airtel Africa, with Qatar Holdings and Mastercard among the minority investors.

Banking and wealth management group Investec fell even as it said first-half results were set to be in line with the guidance given in May.

Outside the FTSE 350, Mothercare shares tanked as the retailer warned of an "uncertain" future after its leading Middle East franchise partner said it would be closing most of its stores.