US stocks dive after inflation data dampens hopes of interest rate cuts

US stocks have dived while UK stock markets remained steady as investors reacted to fresh inflation data from across the pond, raising concerns that interest rate cuts could came later than expected.

London’s FTSE 100 nearly surpassed the 8,000 mark during the day but lost some of its gains in the afternoon.

It was up 26.42 points, or 0.33 per cent, to 7,961.21 at the close, with a strong showing for retailers following Tesco publishing its yearly results.

It was a more mixed session for European peers, with Germany’s Dax closing 0.11 per cent higher and France’s Cac 40 down 0.05 per cent.

Over in the US, top stock indices started the day’s trading with significant losses following the release of the latest official inflation data, which showed that prices rose faster than expected last month.

Consumer prices rose 3.5 per cent in March, up from 3.2 per cent in February, the US Labour Department said.

Janet Mui, head of market analysis at RBC Brewin Dolphin, said: “US inflation has come in hotter than expected for the third consecutive month, which killed off the chance of a rate cut in June.

“This is a highly consequential inflation report given that we have seen a string of strongerthan-expected data from the US in recent weeks and markets were already unsure whether the Federal Reserve can ease policy as guided.

“Although inflation is moving in the right direction, the market is losing patience on the path to the destination.

“Markets have now pushed back the timing of the first rate cut to September and expect only two cuts this year rather than three.”

By the time European markets closed, the S&P 500 was down about 1.1 per cent and the Dow Jones was down 1.3 per cent.

The pound tumbled against the US dollar following the release of inflation data, and the expectation that interest rates could stay higher for longer.

Sterling was down 1.1 per cent to 1.254 dollars. The pound was more or less flat against the euro at 1.168.

The biggest risers on the FTSE 100 were Tesco, up 10.3p to 297.8p, HSBC, up 18.9p to 663.6p, RS Group, up 12.5p to 723.5p, Next, up 150p to 8,892p, and Reckitt, up 67p to 4,307p.

The biggest fallers on the FTSE 100 were Ocado, down 12.6p to 368p, Barratt Developments, down 9.6p to 456p, Anglo American, down 44.5p to 2,147p, St James’s Place, down 8.4p to 432.6p, and United Utilities, down 16.8p to 995.2p.