FTSE 100 slips as energy stocks drag amid rate hike fears

By Shashwat Chauhan and Shristi Achar A

(Reuters) -Britain's FTSE 100 ended lower on Friday, with energy stocks leading losses as oil prices fell on concerns about interest rates staying higher for longer, while lender NatWest dropped on a dour earnings forecast.

The blue-chip FTSE 100 lost 0.1%, but posted a weekly gain of 1.5%. The index retreated from a record high hit in the previous session but stayed above 8,000 points.

The domestically-focussed FTSE 250 midcap index fell 0.5%, although it eked out a marginal weekly gain.

"Investors are reappraising their expectations for interest rates in the light of very strong data in the U.S. and some quite hawkish comments from central banks," said Paul O’Connor, head of multi asset at Janus Henderson Investors.

Heavyweight stocks such as BP and Shell dragged the energy sector down 1.7%, after oil prices fell on concerns that more U.S. interest rate hikes could weigh on demand, as well as signs of ample supply. [O/R]

Adding to central bank debate, Bank of England (BoE) Chief Economist Huw Pill said the BoE was likely to raise interest rates at a slower pace this year, but it needed to take care not to end its cycle of hikes too soon.

The internationally-focussed FTSE 100 recorded its highest closing level on Thursday, breaching the 8,000-point level for the second time this week, with upbeat corporate earnings and rising commodity prices providing support.

Meanwhile, shares of NatWest tumbled 6.9% to the bottom of the index, after the British bank warned that rising interest rates may not deliver the long-lasting earnings bonanza investors hope for.

The broader banking sector slipped 0.8%.

Segro was a bright spot, up 3.6% as the British warehousing group reported annual rental growth and a jump in pretax profit.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Sherry Jacob-Phillips and Mark Potter)