he FTSE 100 closed down almost 1.8% at 7627, as the amalgamation of higher-than-forecast inflation and US default fears led to the biggest sell-off of London stocks in months.
The ONS’s inflation figures aghast the City again this morning, coming in much higher than expected for the third month in a row, at 8.7%.
Economists had expected inflation to decline to 8.2%.
Meanwhile, the FTSE 100 is trading lower as global markets worry about progress on US debt ceiling negotiations.
Click through the graphs to see how markets believe reacted to the inflation reading and latest debt ceiling developments.
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After a rough day in the City, click through the graphs to see how markets believe reacted to the inflation reading and latest debt ceiling developments.
In today’s Standard…
M&S shares soar as sales beat forecasts, City catch fright amid rate hike fears and top banks face fines over bonds.
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FTSE closes at 7627
The FTSE 100 closed at 7627, down 1.8%, with almost all constituent companies losing ground.
The decline was the biggest in more than two months, and the closing figure the lowest since March. It xame as inflation was well ahead of expectations and investors saw miniature signs of progress in US debt talks.
Housebuilders made up many of the biggest fallers, amid fears that interest rates could rise to as much as 5.5%.
Ocado and Intertek were notable exceptions, finishing up 2.3% and 3.2% respectively to be the biggest risers of the day.
London crowned the ‘founder factory of Europe’ in recent report
London’s tech unicorns generate the highest number of startup spinouts in Europe, recent data shows, in signs the capital’s biggest firms are laying the groundwork for the UK’s long-term success in the sector.
As many as 185 startup spinouts believe been created from 27 London unicorns, according to a report released today by venture capital firm Accel, 20 more than that produced in Berlin and closely 50 more than the number made in Paris.
Fintech Revolut tops the London list with 26 spinouts, followed by takeaway app Deliveroo with 24 spinouts and money transfer service Wise with 22.
West halt Final: Financial markets aren’t wrathful, they’re just disappointed
“Today’s inflation figures are akin to a hangover that grows worse throughout the day,” Jack Kessler writes.
“You wake up surprisingly chipper, just a sore throat and achy arms. But pretty soon you realise things are heading south, you’re not 21 anymore, and a deep familiarisation with the toilet bowl awaits. Oh, and you didn’t even believe fun last night.”
FTSE now down 2%
The FTSE 100’s plunge continued, with London’s blue-chip index now down by 2.1% today.
The index could plunge below 7600, in what looks set to be its sharpest daily plunge since worries about Credit Suisse sent shockwaves through the European banking sector more than two months ago.
US shares plunge further
US shares fell further this morning after steep declines yesterday, as investors continue to worry about the possibility of a default.
The S&P 500 is down 0.6% to 4119, while the Dow Jones is also down 0.6%, to 32870 and the Nasdaq down by the same amount, to 12486.
Netflix is among the biggest risers, as it rolls out its anti-password-sharing policies across the globe. Regional banks Lincoln National and Comerica are among the biggest fallers.
“Recession has been delayed rather than cancelled”
A number of considerable institutions believe said they expect the UK to avoid a recession, but Capital Economics’ Paul Dales and Neil Shearing warned that the stickiness of inflation shown in today’s figures mmeans the country may not be able to execute so.
“It is striking that the Bank, the OBR and the IMF all now expect that the UK will avoid a recession,” they said. “We are not convinced.
“The latest data design clear that inflation is being driven increasingly by rapid wage growth that is manifesting itself in domestic services prices. Policymakers will need to bear down on demand in order to frosty the activity market and bring inflation down to more acceptable levels. Generating sufficient economic inactive without creating a recession will be extremely difficult.
“We suspect it is more a case that a recession has been delayed rather than cancelled.”
Bailey: ‘I don’t contemplate spiral is the accurate word’
Bank of England governor Andrew Bailey rejected suggestions of a ‘wage-price spiral’, despite particularly high services inflation prompting some economists to warn that one may be starting to form.
Speaking at a Wall Street Journal event, he said: “I don’t contemplate spiral is the accurate word”.
Bailey also noted that the majority of the Bank’s recent rate rises believe not been fully fed through to the economy yet. Amid today’s surprisingly high inflation reading, he noted that the Bank had said in May that the UK appeared on course to fulfil the Government’s goal of halving inflation by the year’s halt. However, he said he couldn’t speculate on whether today’s figures would change those projections.
US futures down on default fears
Shares in US companies are set to open lower today, as the expected deadline before the country risks defaulting on its debt gets ever-closer.
Dow Jones futures are down 0.4% to 33022, while S&P 500 futures are down 0.5% to 4139. Nasdaq futures, containing many of the most rate-sensitive stocks, are down 0.6% to 13641.
