Sharecast - The FTSE 100 was down 0.3% at 7,262.42.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown (LON:HRGV), said: "The sell-off has been triggered by data showing the private sector in the US added around double the number of jobs economists expected last month. The addition of just under half a million roles has heaped fuel on the interest rate fire, with such strong data an indication that the economy will need a heavier hand if inflation is to be brought under control.
"Minutes from the latest Federal Reserve meeting also showed that policymakers are more likely to resume interest rate increases, after the decision to pause most recently. There’s growing evidence that interest rate increases up until this point have been more about playing catch up, rather than creating meaningfully tighter conditions, meaning hikes are likely to be coming down the line.
"There has been a suggestion that interest rates in the UK are heading towards 7%, which led to the FTSE 100 having its worst trading day of the year so far. Futures currently suggest a rate of 6.5% by February.
"Attention now turns to the official non-farm payrolls data in the US, due later today. This could slightly contradict the private sector numbers, with economists predicting that the US added 200,000 jobs last month, down from 339,000 in May. Should this be the case, it would still be indicative of a tight market, and median estimates have underestimated the monthly data for over a year. Early trading indicators show US investors are braced for challenging news."
The payrolls report for June is due at 1330 BST, along with the unemployment rate and average earnings.
On home shores, figures from Halifax showed that house prices fell in June at the steepest annual pace in 12 years as the mortgage crisis tool its toll.
Prices declined by 2.6% following a 1.1% fall in May. This was the worst drop since June 2011 and leaves the average price of a UK home at £285,932, versus a peak of £293,992 last August.
On the month, prices were down 0.1% in June following a 0.2% decline the month before.
Kim Kinnaird, director, Halifax Mortgages, said: "Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.
"The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer. While there’s always a lag effect when rates go up, many existing mortgage holders with variable deals or rolling off fixed rates will likely face an increase in the next year."
She continued: "How deep or persistent the downturn in house prices will be remains hard to predict. Consumer price inflation is likely to come down in the near term as energy and food prices look set to reverse their steep rises, but core inflation is clearly proving stickier than originally expected. With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year."
Elsewhere, industry research showed that UK retail footfall fell in June as the heatwave kept shoppers at home.
According to the latest BRC-Sensormatic IQ Footfall Monitor, total UK footfall fell by 1.9% in the five weeks to 1 July, although that was an improvement on May’s 2.8% decline.
Within that, high street footfall edged up 0.6% year-on-year. But it fell 2.6% in retail parks and by 4.2% in shopping centres.
Helen Dickinson, chief executive of the British Retail Consortium, said: "Footfall was down as the hot weather meant people opted to enjoy the outdoors."
In equity markets, utilities were on the back foot after a strong session on Thursday, with Severn Trent (LON:SVT), United Utilities, SSE (LON:SSE) and National Grid (LON:NG) all lower.
OSB Group tanked after warning that it expects an adverse effective interest rate adjustment of around £160m to £180m in the first half of 2023 on an underlying basis. It said this was due to "a reduction in the expected time spent on the reversion rate by Precise Mortgages customers".
Canaccord Genuity said: "We estimate this will result in an approximately 30% hit to consensus profit before tax in FY23 and circa 8% hit to NAV."
Paragon and Virgin Money (LON:VMUK) also lost ground.
Shell (LON:RDSa) was flat after the oil giant said it expects second-quarter gas trading results to be "significantly lower" than in the previous quarter.
On the upside, Coca-Cola (NYSE:KO) HBC rallied as it upgraded full-year earnings guidance after a stronger-than-anticipated finish to the first half of the year.
Elementis (LON:ELM) jumped after JPMorgan (NYSE:JPM) Cazenove upgraded the stock to ‘overweight’ from ‘neutral’ as it pointed to a relatively better earnings outlook supported by self-help actions.
Market Movers
FTSE 100 (UKX) 7,262.42 -0.25%
FTSE 250 (MCX) 17,923.21 0.04%
techMARK (TASX) 4,283.63 -0.33%
FTSE 100 - Risers
Coca-Cola HBC AG (CDI) (CCH) 2,370.00p 5.01%
Ocado Group (LON:OCDO) 572.60p 3.51%
Rolls-Royce Holdings (LON:RR.) 148.50p 2.27%
Kingfisher (LON:KGF) 222.20p 1.88%
Melrose Industries (LON:MRON) (MRO) 487.60p 1.44%
Johnson Matthey (LON:JMAT) 1,683.50p 1.39%
Glencore (LON:GLEN) 438.65p 1.36%
International Consolidated Airlines Group (LON:ICAG) SA (CDI) (IAG) 157.00p 1.36%
JD Sports Fashion (JD.) 139.85p 1.34%
Anglo American (LON:AAL) 2,194.00p 1.18%
FTSE 100 - Fallers
United Utilities Group (UU.) 928.80p -1.94%
Relx plc (REL) 2,491.00p -1.81%
Severn Trent (SVT) 2,407.00p -1.80%
National Grid (NG.) 1,004.00p -1.57%
Airtel Africa (AAF) 102.40p -1.54%
SSE (SSE) 1,738.50p -1.28%
Tesco (LON:TSCO) 246.40p -1.16%
Intertek Group (LON:ITRK) 4,054.00p -1.12%
Haleon (LON:HLN) 308.35p -1.07%
London Stock Exchange Group (LON:LSEG) 8,000.00p -1.06%
FTSE 250 - Risers
Elementis (ELM) 105.20p 5.20%
Bank of Georgia Group (LON:BGEO) 2,735.00p 3.21%
Wizz Air Holdings (LON:WIZZ) 2,660.00p 2.66%
Abrdn Private Equity Opportunities Trust (LON:APEO) 448.50p 2.63%
Rotork (LON:ROR) 298.60p 2.26%
BH Macro Ltd. GBP Shares (BHMG) 367.00p 2.23%
Marks & Spencer Group (MKS (LON:MKS)) 189.95p 2.21%
Carnival (NYSE:CCL) 1,328.00p 1.96%
Man Group (EMG) 221.80p 1.65%
Liontrust Asset Management (LON:LIO) 659.50p 1.62%
FTSE 250 - Fallers
OSB Group (OSB) 338.00p -28.18%
Future (FUTR (LON:FUTR)) 665.00p -3.76%
Paragon Banking Group (PAG) 492.40p -3.26%
Virgin Money UK (VMUK) 141.05p -2.96%
Dr. Martens (DOCS) 113.30p -2.50%
Quilter (QLT) 76.55p -2.23%
Mobico Group (MCG) 92.00p -2.18%
Ferrexpo (LON:FXPO) 88.10p -1.78%
Darktrace (LON:DARK) 282.20p -1.78%
Pennon Group (LON:PNN) 679.00p -1.67%
