Inflation worries and sliding oil prices weigh on London shares

London’s markets slid lower after a damning afternoon session which saw inflation concerns and plunging oil prices hit trader sentiment.

London stocks fell after the Office for Budget Responsibility (OBR) warned that the UK’s debt pile is set to grow further and the watchdog’s chief warned this debt will be more exposed to inflation and interest rates shocks than before the pandemic.

Economists also warned that the Government’s climate targets will weigh on its ability to tackle debt.

The FTSE 100 closed 64.03 points, or 0.89%, lower at 7,100.88 on Tuesday.

Danni Hewson, AJ Bell financial analyst, said: “Inflation woes certainly seem to have gripped UK investors today following a pretty grim report from the Government’s public spending watchdog.

“High levels of public debt are more vulnerable than ever to rising interest rates but failure to spend to deal with issues such as Covid scarring and meeting climate targets brings its own costs and requires the current Chancellor to perfect his soft shoe shuffle.

“Today has felt like an adjustment off the back of yesterday’s ‘freedom focused’ boost.”

The price of oil also retreated sharply on Tuesday from seven-year highs after Opec’s failure to reach an agreement over production levels sparked further volatility.

Brent crude decreased by 3.41% to 74.53 dollars per barrel.

Elsewhere in Europe, the German markets were weighed down by poor economic data as factory orders came in below expectations.

The German Dax decreased by 0.96% and the French Cac moved 0.91% lower.

Across the Atlantic, a downturn in US economic data and sliding Treasury yields impacted most of Wall Street, although the tech-focused Nasdaq made gains.

Meanwhile, sterling drifted slightly lower despite stronger-than-expected UK construction figures for last month.

The pound was down 0.22% versus the US dollar at 1.378 and decreased by 0.08% against the euro to 1.166.

Commercial property firms dropped after retail landlords British Land and Land Securities were both hit by downgrades from brokers at Jefferies.

British Land was 21p lower at 501.2p, while LandSec declined by 21.8p to 682.8p at the close.

In company news, Ocado saw its shares decline after the firm posted a slowdown in recent retail sales growth as customers returned to some of their pre-pandemic habits.

The group said revenues for its retail joint venture with Marks & Spencer jumped 19.8% higher in the first half to £1.2 billion, as it lost pace from a 39.7% sales rise in the quarter to February.

Shares in the business were 83.5p lower at 1,901.5p at the end of trading.

Rival Sainsbury’s edged higher after it lifted its profit targets for the year slightly, hailing a better-than-expected sales performance for the past three months.

The supermarket chain said it now expects to post £660 million in pre-tax profits for the year, improving upon its previous £620 million guidance.

Shares lost steam slightly in the afternoon but still finished 1.6p higher at 279.8p.

The biggest risers on the FTSE 100 were Informa, up 12.2p at 535.6p, Segro, up 18p at 1,136p, United Utilities, up 16p at 1,016p, and Avast, up 7.6p at 502p.

The biggest fallers were Antofagasta, down 67p at 1,404.5p, Ocado, down 83.5p at 1,901.5p, BP, down 13.45p at 310.8p, and Evraz, down 24.6p at 586.6p.