FTSE 100 Falls Amid Luxury and Bank Stock Sell-off

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On Monday, the UK’s FTSE 100 experienced a 0.4% decline, primarily influenced by a sell-off in luxury and bank stocks, while uninspiring corporate earnings forecasts weighed on the FTSE 250 shares, keeping the midcap index flat by the close.

The personal goods index took a significant hit, falling by 4.4%. Burberry, in particular, faced a 5.7% slump, extending its losses after three brokerages slashed the target price on the luxury retailer. Last week, Burberry had issued a warning about a worsening slowdown in demand for luxury goods.

Michael Hewson, Chief Market Analyst at CMC Markets UK, noted that the day’s notable fallers on the FTSE 100 were largely due to broker downgrades, with Burberry’s shares being downgraded by Goldman Sachs to neutral, expressing concern over potential further weakness in its margins.

Among the sectors, non-life insurers emerged as the top performers, gaining 1.3%. In contrast, banks experienced a 1.8% decline, marking five consecutive days of losses. HSBC, a prominent lender, lost 2.2% following a downgrade by Exane, citing margin headwinds.

Investors are eagerly anticipating British consumer price inflation data and retail sales figures for December, expected later in the week, to gain insights into the potential timing of interest rate cuts. The Bank of England is perceived as relatively hawkish compared to counterparts like the Federal Reserve and the European Central Bank.

Looking across the Atlantic, investors are keenly watching U.S. business activity data for January and December retail sales.

Amidst these movements, PageGroup, a global recruiter, saw a 0.3% fall after trimming its annual profit forecast. Homebuilder Crest Nicholson also experienced a decline of 0.8% following a cut in its annual profit forecast.

Despite these challenges, there is a silver lining in the UK housing market as average asking prices for homes started the year with their strongest performance since 2020. An industry survey suggested a potential easing of the sector’s slowdown.