London stocks slide as rate expectations and politics weigh

London’s benchmark indexes fell on Tuesday, with the FTSE 100 down 0.7% and the FTSE 250 off 1.8%. The FTSE 100 reached its weakest level since June 12 and the FTSE 250 its lowest since June 10.

Traders raised expectations for interest rate increases after the appointment of Kevin Warsh as US Federal Reserve chair. Markets are now largely pricing in around two 25-basis-point hikes in the United States by year-end, up from one earlier in June. Data compiled by LSEG showed investors expect at least one 25-basis-point rise from the Bank of England in December.

Lower prices for gold, silver and copper weighed on mining stocks. Precious metal and industrial metal miners each fell about 5%, pulling the market lower. Antofagasta slid 6.5% and Fresnillo dropped 5.6% as investors reduced positions in commodity-linked names.

Defensive sectors outperformed. Healthcare, pharmaceutical and consumer staples shares each rose more than 1%.

Political developments added uncertainty. Keir Starmer resigned on Monday and attention moved to the leadership contest, with Andy Burnham widely expected to become prime minister after an endorsement from former health minister Wes Streeting. Investors are watching Burnham’s likely fiscal stance while public debt is near 100% of GDP.

Data showed Britain’s services sector contracted in June at its fastest pace in nearly three-and-a-half years.

Company news produced sharp moves. Bunzl rose about 3% after raising its annual revenue growth outlook, citing strong first-half performance in North America and selective price increases. Telecom Plus plunged roughly 24% after warning that a new five-year investment plan would reduce near-term profits amid rising competition.

Markets globally struggled to sustain gains as tighter monetary policy expectations prompted investors to reassess exposures across cyclical sectors and commodity-linked equities.