FTSE 100: Sticky inflation figures spook markets as investors brace for rate hike pain
FTSE 100 tumbled in early trading this morning as investors took fright at sticky inflation figures that could trigger further interest rate hikes this year.
London’s flagship index was trading down 1.5 per cent as of 9:30am after inflation figures shocked the City, coming in much higher than forecasts at 8.7 per cent.
Sticky inflation figures, particularly in food, left traders predicting that the Bank of England would hike rates further to 5.5 per cent this morning.
Investment director at AJ Bell, Russ Mould, said further hikes would “bring more pain to companies and consumers” and had unsettled the market.
“The stock market didn’t like the news, with the FTSE 100 falling 1.5 per cent to 7,643,” he added.
“There were only two stocks rising in the index – testing group Intertek and renewable energy expert SSE. The biggest fallers were housebuilders and property companies, understandable given their sensitivity to interest rate moves.”
Persimmon was the fastest faller, tumbling 4.5 per cent, while Taylor Wimpey fell 4.4 per cent and Barratt four per cent.
Bond markets have also been sent into a spin this morning on the inflationary news. The UK 10-year Gilt rate jumped to 4.3 per cent, the highest level since last October and significantly ahead of the three per cent level seen only three months ago.