Markets dip as inflation worries take hold

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%, at 7091.19 as inflation of 2.5% 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% and the German DAX 30 was off by 0.66%.

The pound was down 0.1% against the dollar at 1.386 and down 0.2% 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 £30 million 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 £80 million.

But the company added underlying pre-tax profits will be slightly ahead of expectations, sending shares up 2%, 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 39 billion US dollar (£28.2 billion) 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.

Homeware retailer Dunelm hailed a “strong” jump in sales for the past three months on the back of pent-up demand from shoppers returning to stores at £380.1 million – up 43.9% on the same period in 2019 before the pandemic.

But investors appeared to be cashing out on the recent high share price at the firm, with shares closing the day down 90, or 6.3%, at 1,349p.

The boss of Upper Crust owner SSP Group, Simon Smith, said he will be stepping down at the end of the year after less than two years with the group – primarily during its toughest time as airports and transport hubs remained closed or deserted.

Shares closed down 11.3p at 253.1p.

Online fashion firm Boohoo agreed a deal to sell its brands in franchised Debenhams stores and online across the Middle East with Alshaya Group.

Shares closed up 1.3p at 292.7p.

And bread and cake supplier Finsbury Foods said sales have rebounded over the past year, although they remain slightly below pre-pandemic levels. A 2.3% increase in revenues to £313.3 million for the year to May was cheered by investors, with shares closing up 1p at 92p.

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 Takeaway down 121p at 6,422p.