LONDON: London stock indexes fell on Thursday after the Bank of England raised interest rates by an expected quarter percentage point, while a profit warning by online fashion retailer ASOS hit the retail sector.

The blue-chip FTSE 100 index and the domestically focussed mid-cap FTSE 250 index both ended 3.1% lower.

The central bank raised rates to 1.25%, the highest since January 2009, and stuck to its more gradual approach as it warned that Britain’s economy would shrink in the April-June period.

The 25-basis-point rate rise came against the backdrop of heightened expectations of a bigger hike, especially after the US Federal Reserve increased its key rate by 75 bps, its biggest hike since 1994.

“The Bank of England is playing a game of slowly, slowly catchy inflation, rather than the shock-and-awe tactics being employed across the Atlantic,” Laith Khalaf, head of investment analysis, at AJ Bell said.

“Markets will no doubt seize on this as a sign the Bank of England has bottled it, but an incremental strategy allows the rate setting committee to observe more data as it comes in and finetune its approach as circumstances dictate.” Oil major BP and Shell slid more than 5.1%,weighing the most on the FTSE 100 index, while the industrial miners fell 4.2%.

Shares in global companies including Diageo and British American Tobacco fell 2.2% and 3.5% respectively, as sterling strengthened on the rate hike news.

Rate-sensitive banks were down 3.8%.

Homebuilder Persimmon and asset manager Intermediate Capital slumped 12.0% and 7.6%, respectively, to the bottom of the index as their shares traded ex-dividend.

ASOS Plc fell 32.5% and Boohoo 11.3% after the online fashion retailers warned of pain from rising product returns as consumers battle inflation and return to pre-pandemic behaviour.

The broader retailers index shed 3.9%. Informa gained 1.0% after the events organiser more than doubled its share buyback programme and forecast upbeat annual sales and profit outlook.