UK's FTSE 100 snaps two-day rally as energy, financial stocks weigh

UK's FTSE 100 index slipped on Thursday to snap a two-day rally as energy and financial stocks fell and a stronger pound weighed on the back of a weaker dollar after signs the U.S. Federal Reserve will temper its pace of interest rate hikes.

The FTSE 100 index UK100 closed down 0.2% after edging toward a six-month high during the day. Oil majors BP BP. and Shell SHEL were down 1.6% and 2.5%, respectively.

Sterling GBPUSD jumped 1.5%, hitting its highest level since Aug 10.

"We're seeing a little bit of a correction, on the back of that rally that we saw yesterday and the day prior. The continuation of the rally started to get a little bit exhausted," said Daniela Hathorn, senior market analyst at Capital.com.

"Also, (Fed Chair Jerome) Powell actually seemed to confirm that the Fed is going to go for 50 basis points rather than 75. So that seems to fall in line nicely with dovish hopes."

The domestically focussed FTSE 250 (.FTMC) jumped 1.3%, mirroring an upbeat mood in global equities.

"If we continue to see macro data that is favourable, indicating that inflationary pressures will continue to weaken, central banks will be able to reach peak policy rates at perhaps a slightly lower level than was expected a few months ago," said Richard Flax, chief investment officer at Moneyfarm.

Meanwhile, South Africa-exposed stocks such as financials Investec INVP, Old Mutual OMU Ninety One N91, and miner Anglo American AAL took a hit as the country dealt with presidential woes.

Real estate (.FTUB3510) stocks rose 1% even as data showed house prices tumbled 1.4% in November compared with a 0.9% fall in October, the biggest monthly drop since June 2020.

"Housebuilder shares, already heavily beaten down this year, were higher on the Nationwide data. This shows how the market has already priced in a lot of bad news regarding the property market," said Russ Mould, investment director at AJ Bell.

Food delivery stocks like Ocado OCDO gained 6.8% after Jefferies said in a note there is an attractive EBITDA stream in the sector currently mispriced by the market.

Pearson PSON shed 5.2% after Exane BNP Paribas downgraded the education group's stock to "neutral" from "outperform."