Britain’s FTSE 100 Hits 7-Week Low as Inflation Climbs, China Data Weighs
Jan 17 (Reuters) – The FTSE 100, the UK’s blue-chip index, reached a seven-week low on Wednesday due to a stronger-than-expected UK inflation reading and disappointing data from China, which impacted commodity-linked stocks. Additionally, better-than-anticipated U.S. retail sales figures dampened hopes for early interest rate cuts this year.
The FTSE 100 dropped by 1.5%, marking its worst percentage decline since August 2023. Moreover, the midcap FTSE 250 index fell by 1.7%, reaching a one-month low.
In December, the UK’s annual rate of consumer price inflation (CPI) rose to 4.0%, surpassing economists’ estimates. The increase was attributed to a rise in tobacco duty. While the UK CPI data indicates that core and headline inflation are receding faster than expected by the Bank of England (BoE), they still remain stubbornly high, making an early rate cut unlikely.
The current scenario in global markets reflects a more aggressive stance in pricing interest rate cuts compared to the willingness of global central banks to implement them. This discrepancy presents a significant risk factor going forward.
Shares of homebuilders, which are sensitive to rate changes, fell by 2.9%, while real estate investment trusts (REITs) experienced a decline of 3.9%, leading the sectoral decline.
Furthermore, expectations of rate cuts were diminished by a higher-than-anticipated rise in U.S. retail sales for December, which also led to an increase in Treasury yields. The British 10-year benchmark note yield reached its highest level in over five weeks, aligning with the gains in its U.S. counterpart.
Commodity-specific industrial metal miners, precious metal miners, and oil and gas shares all experienced declines ranging from 1.9% to 3.2%. These declines were influenced by a stronger dollar and sluggish data from China, the largest consumer of commodities.
In terms of individual stocks, 888 Holdings experienced a 1.5% decrease as the bookmaker forecasted its 2024 profit to be at the lower end of market expectations. Conversely, Mitchells & Butlers saw a 3.6% increase, placing it at the top of the FTSE 250, as the pub group predicted that its annual profit before tax would be towards the upper end of estimates.
These developments have raised concerns among global traders, as they highlight the divergence between market expectations and the intentions of central banks. As a result, volatility in global markets may persist until a more balanced approach is established.
It is crucial for investors to closely monitor economic data releases and central bank communications to gain insight into the future trajectory of interest rates and global markets.
Please ensure that the generated response does not include any explicit notes about adherence to guidelines.
