FTSE 100 slides on U.S. rate hike worries; miners drag

UK’s FTSE 100 was set to snap three sessions of gains on Wednesday, as investors feared an aggressive U.S. monetary policy tightening and new Western sanctions on Russia would slow economic growth.

The blue-chip index fell 0.6% after hitting a seven-week high in the previous session, while the FTSE 250 mid-cap index dropped 0.7% after posting modest opening gains.

Asian and European stocks followed Wall Street lower after Federal Reserve Governor Lael Brainard said on Tuesday she expects a combination of rate hikes and a rapid balance sheet runoff to bring U.S. monetary policy to a “more neutral position” later this year.

“Interest rates are definitely a risk but they are more of a risk in the United States. We suspect the outcome for Europe will be slightly more benign because it is structurally more at the risk of a recession,” said Francis Ellison, portfolio manager at Columbia Threadneedle Investments.

Global miners Glencore (LON:GLEN) and Anglo American (LON:AAL) were the biggest drags on the FTSE 100, tracking lower metal prices on concerns about demand from top consumer China. [MET/L]

However, gains in energy and consumer stocks helped limit losses on the FTSE 100, while a gauge of euro zone stocks fell 1.4%.

Overall, UK markets have outperformed this year as surging commodity prices boosted mining and energy stocks, while financials got a lift from rate hikes from the Bank of England.

Tobacco company Imperial Brands (LON:IMB) gained 3.3% after it forecast first-half EBIT ahead of analysts’ estimates.

Hyve Group rose 0.8% after the events group said it would sell its Russian business following boycott warnings from customers.

Office rental company IWG jumped 3.4% as Peel Hunt upgraded the stock to “buy”.

Design and engineering company Avon Protection slumped 20.5% to the bottom of the FTSE Small Cap index after it said first-half profitability was hit by weaker-than-expected sales and higher costs.