London’s FTSE 100 index fell on Wednesday evening as Andrew Bailey warned that the UK would face high inflation for months to come.
The capital’s premier index closed down 0.36 per cent at 7,723.23 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.30 per cent to 19,215.45 points.
Markets were spooked following comments from Andrew Bailey, governor of the Bank of England. Bailey said that the chances of persistently higher inflation are mounting due to a wage-price spiral.
He suggested “the unwinding of second-round effects may take longer than it did for them to emerge” raising the sceptre of further rate hikes.
Markets were also concerned by the debacle over the US debt ceiling. US lawmakers are locked in talks over the debt ceiling with Treasury Secretary Janet Yellen warning that the government might run out of cash as soon as June. In the event of a default the global financial system could be plunged into turmoil, Yellen warned.
Following meetings today, both Biden and McCarthy expressed optimism that a deal was within reach. “I think at the end of the day, we do not have a debt default,” the Republican congressman said in an interview with CNBC.
JD Sports was amongst the worst performers on the FTSE 100, falling nearly four per cent despite delivering profits ahead of expectations. Markets were concerned as the sports retailer took a £554m hit on its investments.
Excluding the writedown, the Manchester based company saw pre-tax profits £991.4 million in the year ending January 2023, up from £947.2m on the previous year.
It is currently ploughing ahead with a five year growth strategy, which has seen it eye expansion in North American and European markets.
Finalto’s Neil Wilson commented: “Sales exceeded £10bn for the first time with solid progress made in the US, and with plans to open a lot more stores investors should expect more growth. The question will be about execution, margins and market share but so far so good.”
Experian finished the day 0.2 per cent lower, having fallen nearly five per cent as markets were unimpressed by the firm’s forward guidance.
Bosses said they were expecting revenue to grow between four per cent to six per cent in the year ahead, while analysts had priced in growth expecting a 5.8 per cent growth.
Hargreaves Lansdown’s Steve Clayton said: “Experian have delivered the growth expected and have painted an outlook which although rosy is, to be honest, no better than that which the market was already expecting them to paint.”
Watches of Switzerland also slumped 5.4 per cent despite reporting a rise in revenue in the latest financial year. Its shares were down nearly eight per cent.
Investors may have been worried by the forecast of a “modest sales decline” in the first quarter of the new financial year.
The pound was flat at $1.2480, having traded lower earlier in the day.