The FTSE 100 managed to hold firm as another credit rating agency raised concerns about the UK’s increasing debt pile, while soaring mortgage rates and a cut in Opec oil output weighed on both households and prospects for the economy. 

The blue-chip index slipped 0.1%, or 9 points, to 7,043 as Fitch lowered its credit outlook for UK government debt from ‘stable’ to ‘negative’ following similar moves by S&P and Moody’s, although it has not yet cut the formal ‘AA-’ rating. 

‘This matters because even without a downgrade, the UK’s borrowing costs have risen sharply, and if the “stable rosette” is ripped off, foreign creditors are going to demand even more money to fund the government’s growing debt pile,’ said Susannah Streeter, senior investment analyst at Hargreaves Lansdown.

Streeter noted interest payable on long-dated government debt had come down after the Bank of England intervened last week to scoop up bonds, with 30-year gilt yields retreating from highs of 5%.

‘But they are creeping higher again, and although the Bank paused its emergency purchases to assess the market, if yields start to march up, it may have to dive back into bond buying.’

There was more bad news for the economy and households as mortgage rates soared to a 14-year high and oil prices pushed higher, with oil cartel Opec confirming it would cut oil production by two million barrels a day in concert with Russia to buoy the price of the black stuff. Oil continued to hold onto gains, with Brent crude hovering around $93 (£83) a barrel, up more than 10% since a recent low last Monday, creating what Streeter said was a ‘severe inflation headache’.

The biggest faller on the FTSE was DS Smith (SMDS), which dropped 4.1%, or 10p, to 247p. The packaging company was followed by Shell (SHEL), which lost 3.6%, or 86p, to reach £22.92 despite firmer fuel prices as chief executive Ben van Beurden acknowledged the case for windfall taxes on oil and gas companies during the energy crisis.

At an energy conference, he said: ‘One way or another there needs to be government intervention that somehow results in protecting the poorest. That probably may mean that governments need to tax people in this room to pay for it.’

Imperial Brands (IMB) was a bright spot, up 4%, or 76p, to £19.74, as it announced a £1bn share buyback. The stock confirmed full-year revenue and profit are expected to grow around 1% this year.

The FTSE 250 ticked slightly higher, up 18 points at 17,580, led by Volution (FAN), which surged 15.3%, or 47p, to 353p after reporting an encouraging start to its financial year. The ventilation products group said revenue and profit were ahead of last year and increased its dividend 15.9% to 7.3p.

CMC Markets (CMC) shares climbed 6.2%, or 14p, to 236p as the company said first-half profits are expected to be up 21% as market volatility has driven trading volumes on the spread-betting and contracts-for-difference trading platform.

Budget bargains

In investment trust news, BlackRock Sustainable American Income (BRSA ) rallied 4% to 203p from an 8% discount.

Also recouping some post-Budget falls, GCP Asset-Backed Income (GABI ) rose 2.4% to 80p after the shares dropped to 21% below their net asset value yesterday.

Similarly, Schroder UK Public Private (SUPP ) added 4.8% to 17.9p after its share price discount widened to 52%.

Vietnam Enterprise Investments (VEIL ) was weak, off 3.5% at 615p, after its discount narrowed to 15% below its one-year average of 18%.

Abrdn Property Income (API ) gained 1.5% to 60.6p but remains on a wide 46% discount as investors remain cautious about rising interest rates. The value of its portfolio fell 4.2% on a like-for-like basis in the third quarter but the manager has sold its lowest-yielding asset, an industrial property in Rainham, Essex, for for £21.7m, and will use the money to reduce its overdraft.

Tritax Eurobox (EBOX ) added 1.8% to 61.7p on a 51% discount as its fund manager agree to cut its tiered annual fee to 1% on net assets up to €1bn.