Markets dip as inflation worries take hold

Market report

Rising inflation spooked markets on Wednesday as the London Stock Exchange’s leading index cooled.

The FTSE 100 closed the day down 33.53 points, or 0.47 per cent, at 7091.19 as inflation of 2.5 per cent in June along with more jitters around England’s ending of restrictions left investors nervous.

CMC Markets analyst Michael Hewson explained: “It’s been another mixed session for markets in Europe today, with the FTSE 100 underperforming once again, as a fresh set of inflation figures generates further concern about the ‘transitory’ narrative, so beloved of central bankers.

“Concerns about inflation, transitory or otherwise have continued to dominate sentiment today, as worries over the pace and persistence of rising prices, temper optimism over the wider global recovery story. Markets in Europe have undergone a broadly underwhelming session in contrast to US markets which continue to set new records.”

In France, the CAC 40 closed down 0.09 per cent and the German DAX 30 was off by 0.66 per cent.

The pound was down 0.1 per cent against the dollar at 1.386 and down 0.2 per cent against the euro at 1.171. The dollar strengthened following announcements from the US Fed chief, Jerome Powell, who suggested inflation in the States is likely to only be temporary.

In company news, housebuilder Barratt Developments revealed a further £30m hit for remedial works over cladding on its buildings in the wake of the Grenfell Tower disaster, taking its total annual bill to more than £80m. But the company added underlying pre-tax profits will be slightly ahead of expectations, sending shares up 2 per cent, or 14.2p to 711p.

Coronavirus vaccine maker Astrazeneca was given the all-clear by the UK competition watchdog, the Competition and Markets Authority (CMA) to go ahead with its 39b US dollar (£28.2b) megadeal to buy US drug company Alexion Pharmaceuticals. But investors appeared less impressed with the news, with shares in the drug maker closed down 90p at 8,669p.

The biggest risers on the FTSE 100 were Barratt Developments up 14.2p at 711p; Glencore up 5.5p at 319.25p; Natwest up 3.3p at 204.7p; Anglo American up 42p at 2,987.5p and Persimmon up 34p at 3,018p.

The biggest fallers were Hargreaves Lansdown down 59p at 1,618p; Ocado down 57p at 1,848p; Hamla down 58p at 2,792p; Intermediate Capital down 42p at 2,151p and Just Eat down 121p at 6,422p.