HSBC's 2% fall made it the largest single drag on London's Blue-Chip index on Tuesday, as lenders retreated ahead of an expected Bank of England rate rise on Thursday.

HSBC (LSE:HSBA) did not post the biggest percentage fall in the FTSE 100 on Tuesday 3 November 2026. It did, however, do the most damage. The lender's 2.0% decline made it the biggest approximate drag on the index in points terms, on a day when the FTSE 100 fell 122.90 points, or 1.14%, to close at 10,638.43.

HSBC was not alone. The FTSE 350 banks index fell 1.6%, with Reuters linking the move to positioning ahead of the Bank of England's Interest Rate decision on Thursday 5 November. Coming just two days before the Monetary Policy Committee announces its verdict, the sector's weakness offers an insight into how investors are approaching a potential turning point in UK monetary policy.

Why size matters in the index

The FTSE 100 is weighted by market capitalisation. Each company's influence on the index depends on its total market value, so the largest constituents carry the greatest weight. HSBC is among the biggest companies in the index, which means even a moderate percentage move translates into a sizeable number of index points.

By comparison, Antofagasta (LSE:ANTO) fell a steeper 3.5% and Associated British Foods (LSE:ABF) dropped 2.2% on Tuesday. Yet because of HSBC's scale, its 2.0% fall had a larger approximate effect on the headline index. This is why bank shares, and HSBC in particular, are often central to explaining the FTSE 100's daily moves.

The rate decision in focus

A 25 basis point rise in Bank Rate, from 3.75% to 4%, is widely expected on Thursday. That would be the first hike since August 2023. Money markets had fully priced four quarter-point increases by next September, according to LSEG data cited by Reuters, which implies a substantial tightening cycle.

Views differ on whether that pricing is justified. ING expects a follow-up hike in February, but it has described pricing for further hikes as looking "extreme". Alessia Berardi, head of global Macroeconomics at Amundi Investment Institute, said the market was pricing a full hiking cycle, but added: "we think that one or two moves will be enough."

The driver behind the debate is energy. Reuters noted that elevated oil prices have fuelled Inflation fears and that many central banks have raised rates. Brent settled on Monday 2 November at $104.77 after a fall of $8.66, and crude slid about 2% more on Tuesday in volatile trade as investors weighed talks aimed at ending the wars in Ukraine and Iran.

The link between interest rates and bank shares is not one-directional. In general terms, higher rates can allow lenders to earn more on loans relative to what they pay depositors, a gap often referred to as net interest margin. That can be supportive for profits.

However, higher rates can also create challenges. Rising borrowing costs may reduce Demand for mortgages and Business loans, and they can put pressure on borrowers who are already stretched, raising the risk of defaults. For Mortgage lenders in particular, the pace and scale of rate changes can affect both lending volumes and Credit quality.

When markets are uncertain about how far rates will rise, these competing effects can make bank shares volatile. Selling ahead of a decision does not necessarily reflect a negative view on the outcome; it can simply mean investors are reducing exposure until the picture becomes clearer. Bank of England communication about the likely path of future rates may matter as much as the decision itself.

A wider sell-off

Banks were one of two main drags on the FTSE 100 on Tuesday. The other was mining: the FTSE 350 basic resources index fell 2.6% as copper hit a multiweek low, with Glencore (LSE:GLEN) down 2.8% alongside Antofagasta's 3.5% drop. Coca-Cola Europacific Partners (LSE:CCEP) fell 2.1% after flagging cost pressures, and ABF was among the fallers after forecasting lower annual profit.

The session was the FTSE 100's steepest one-day fall in a month, according to Reuters, and ended a run of four straight gains. The mid-cap FTSE 250 fell a more modest 0.5% to 24,674.91.

Currency markets offered a calmer picture. Sterling was around $1.3417 on Monday 2 November and about 83.53p per euro, according to Reuters. A rate rise that is already widely anticipated may have limited immediate impact on the pound, although any shift in the Bank's guidance could change that.

The corporate calendar also brings several other financial names into view this week. Lion Finance (LSE:BGEO) and Prudential (LSE:PRU) publish third-quarter figures on Wednesday, and M&G (LSE:MNG) reports its third-quarter update on Thursday, the same day as the rate decision. Those releases could give investors further insight into how financial companies are faring as borrowing costs look set to rise.

Housebuilders are another group often sensitive to rate expectations, given their reliance on mortgage availability. Barratt Redrow (LSE:BTRW) issues a trading statement on Wednesday, providing one more read on how rate-sensitive parts of the market are positioned ahead of Thursday.

Key dates to watch

Wednesday 4 November:Lion Finance and Prudential third-quarter updates; Barratt Redrow trading statement; eurozone inflation figures (expected 3.9%).

Thursday 5 November:Bank of England MPC decision, with a 25bp rise to 4% widely expected; M&G third-quarter update.

Friday 6 November:US October jobs report.

Thursday 12 November:ONS first quarterly GDP estimate for July to September 2026 (7:00am).

The bottom line

Banks weighed heaviest on the FTSE 100 on Tuesday because of a combination of size and timing. HSBC's 2.0% fall carried outsized weight in a market-cap-weighted index, and the FTSE 350 banks index's 1.6% decline came as investors positioned for a widely expected rate rise. With money markets pricing a longer hiking cycle than some economists anticipate, Thursday's decision and the Bank of England's guidance on what comes next are likely to remain the focus for lenders and the wider index.