Diageo, Kingfisher and other companies reporting earnings may gain, though, on signs that growth is boosting profits.
Unemployment statistics for August are released on Wednesday. In July the number of people out of work fell to a 19-year low, suggesting the economy is expanding and pushing wage growth higher. The Bank of England Monetary Policy Committee said the tightness of the labour market was one of the reasons it unexpectedly raised the benchmark interest rate by a quarter point to 5.25 per cent last week.
"The labour market is one area the MPC will be scrutinising closely," said Steven Wright, an equity strategist at Credit Suisse First Boston. He recommends investors sell shares of companies most reliant on economic growth and buy defensive stocks such as utilities and tobacco companies.
Average earnings will also be published the same day and will be closely watched. "Prices ticking up aren't exactly going to inspire confidence. There's a risk average earnings moved higher again, which the market won't take kindly to," said Charlie Diebel, bond strategist at Societe Generale.
Most analysts expect higher rates by the end of the year, with two predicting a rise in October. Gilt yields climbed to their highest level in 13 months last week, with the benchmark 10-year government bond yield surging 26 basis points to 5.55 per cent.
The FT-SE 100 index fell 2.23 per cent to 6,191 last week. The construction industry fell the most, down 4.5 per cent, as the rate rise sparked concern that it will be the first in a series that will dampen the housing market, reducing profits of builders.
Banks slipped 2.3 per cent as a group and insurers declined 4.8 per cent, sensitive to higher rates that could depress demand for borrowing and reduce the value of bond portfolios.
Diageo, the spirits producer, reports full- year earnings on Thursday. The shares are currently recommended by Goldman Sachs with a 12-month price target of 953p. Kingfisher will report half-year earnings on Tuesday. There is speculation that the company is considering a pounds 350m offer for Norwegian electronics retailer Elkjoep as part of its drive into Europe.