A fresh 30-year high UK inflation print wobbled London’s top indexes today.
The capital’s premier FTSE 100 index dipped 0.22 per cent to 7,460.63 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.53 per cent to 21,001.62 points.
Fresh data released today by the Office for National Statistics revealed prices are rising at the fastest pace in three decades in the UK, with inflation hitting 6.2 per cent last month.
Investors seemingly shrugged off the news during morning exchanges, before ditching risky assets in the afternoon.
High inflation tends to weigh on equities as it can damage businesses’ future cash flows and profit margins through a combination of lower demand and higher costs respectively.
However, nominal income can climb as a result of higher prices.
The cost of living is now more than triple the Bank of England’s two per cent target, strengthening the case for more rate hikes in the coming months.
Higher borrowing costs also make stocks less attractive by raising returns on fixed income assets and denting companies’ future income streams.
Industrials nonetheless continued their ascent.
Oil giants BP and Shell were the two best performers on the FTSE 100, advancing 4.47 per cent and 3.86 per cent respectively.
Fears of a looming windfall tax on oil producers’ profits were quashed when Chancellor Rishi Sunak did not include the measure in today’s spring statement.
The pair represent a large share of the index, meaning movements in their share prices exerts a strong influence on the direction of the FTSE 100.