FTSE 100 opens lower as inflation worries weigh
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The FTSE 100 opened lower this morning as market momentum slowed following a tech-fuelled rally on Wall Street last night and inflation worries weighed on investors.
London’s blue-chip index dipped 0.21 per cent to 6,715 points shortly after markets opened. The domestically focused FTSE 250 was marginally down.
It came on the back of a US tech stock rally that drove the Nasdaq up four per cent. The FTSE also finished 0.2 per cent higher yesterday despite mining stocks dragging on the index.
Stock markets have been buoyed by declines in government bond yields, as well as hopes a $1.9 trillion stimulus package in the US will aid economic recovery from the pandemic.
Traders will also be looking to factory prices in China, with the country’s producer price index rising to 1.7 per cent in February — its highest reading since November 2018.
“The surge in prices at the factory level adds weight to the argument that higher inflation is in the pipeline as increases in costs at the factory level are likely to be passed on to consumers,” said David Madden at CMC Markets.
Miners continue to drag
Mining stocks were once again the biggest drag on the FTSE 100, with Rio Tinto, Anglo American and BHP all falling in morning trading.
Oil majors BP and Shell were also among the biggest fallers.
“For today further weakness in oil prices is a welcome development at a time when concerns about rising inflation are gaining traction,” said Michael Hewson at CMC Markets.
“With inventory data due out later today, there is a feeling that for all the concern about a sustained move through $70, oil prices may well be due a pullback towards $60.”
Wagamama owner Restaurant Group bucked the downward trend, rising as much as 13 per cent after it announced a £175m share sale to help mitigate the impact of lockdown.
Insurer Legal & General dipped 0.5 per cent after its 2020 operating profit was hit by a slowdown in housebuilding and demand for life insurance products.
All eyes on inflation
It was a relatively quiet start for European markets, with the Dax and Cac 40 ticking up 0.27 and 0.39 per cent respectively.
US stocks were set to record modest gains at the open as momentum slowed following a tech rally last night.
However, all eyes will be on the US inflation reading for February, which is due to be published this afternoon.
“It is far too early for the figure to reflect the inflationary pressures of a re-opening, rebounding economy, the kind investors have fretted over in recent weeks. For one thing, Biden’s American Rescue Plan still needs to be confirmed by one final vote in the House,” said Connor Campbell at Spreadex.
“However, this latest reading will give the markets a baseline to work from in the coming months, alongside an idea of how the economy is doing at the tail end of the last stimulus bill.”