London stocks closed well into negative territory on Friday, as investors digested an inflation report out of the United States that showed consumer prices rising at a fresh 40-year high in May.
The FTSE 100 ended the session down 2.12% at 7,317.52, and the FTSE 250 was off 1.99% at 19,673.32.
Sterling was also in the red, last trading down 1.35% on the dollar at $1.2324, and slipping 0.4% against the euro to change hands at €1.1720.
“Stocks, and investors, are very jumpy about inflation once again,” said IG chief market analyst Chris Beauchamp.
“This was the case before today’s US CPI figure, thanks in no small part to the European Central Bank, but this afternoon has really set the cat amongst the pigeons.
“Annual and monthly figures came in higher than last month, and no one seemed to want to hang around and look at the core figures, which didn’t paint quite the same picture.
“This puts markets in skittish mode ahead of next week’s Fed meeting, as inflation rises again, sparking new debate about whether Powell and co will need to step up their tightening efforts over the summer.”
Beauchamp said talk of a pause in rate hikes now seemed “very misplaced”.
Indeed, data released earlier in the afternoon showed the cost of living in the US rising more quickly than expected last month, with broad-based gains across categories.
According to the US Department of Labor, the consumer price index rose by a seasonally-adjusted 1.0% month-on-month, pushing the annual rate of gains to 8.6%, versus 8.3% in April.
At the core level, which excludes the oft-volatile energy and food components, CPI was up by 0.6% on the month.
In year-on-year terms, core CPI was ahead by 6.0% in annual terms, against increases of 6.4% and 6.2% in March and April, respectively.
Economists at Barclays Research had forecast a rise in the annual rate of headline CPI to 8.4%, but a further dip at the core level to 5.8%.
Staying stateside, a key gauge of consumer confidence hit a more than 40-year low in early June, led by a deteriorating outlook for business conditions one-year ahead.
The University of Michigan’s consumer confidence index dropped from the 58.4 point level at the end of May to 50.2.
That was well short of the consensus call for a print of 59.0, and its lowest recorded value, comparable to the trough reached during the middle of the 1980s recession.
On home shores, inflation expectations continued to accelerate in the Bank of England’s latest inflation attitudes survey, as actual prices continued to rise at historically-high rates.
The BoE/Ipsos survey for May said when asked to give the current rate of inflation, respondents gave a median answer of 6.1%, up from 5.0% in February.
In its latest consumer price index data, the Bank said prices rose 9% year-on-year in April, and were expected to accelerate further in the coming months.
The survey said median expectations of the rate of inflation for the coming year were 4.6%, up from 4.3% in February, while expected inflation in the 12 months after that returned a median answer of 3.4%, up from 3.2%.
Elsewhere, more than three-quarters of Britons were said to be concerned about the rising cost of living according to official survey data, with 77% of adults feeling “very” or “somewhat” worried about red-hot inflation.
The Office for National Statistics (ONS) said those most likely to report feeling very or somewhat worried included 81% of women and 73% of men.
Those aged 30 to 49 years came in at 82% concerned, and 50 to 69 years was 77%, compared with 70% of those aged 70 years and above.
“While overall levels of worry tended to be similar among adults with different levels of income, those with a gross personal income of less than £10,000 per year had the highest percentage feeling very worried, whereas those with a gross personal income of £50,000 or more had the lowest percentage feeling very worried,” the ONS said.
“Around seven in 10 adults who said their costs of living had increased and that they were very worried about the rising costs of living reported spending less on non-essentials.
On the continent, Germany’s central bank cut its economic growth forecasts for the country earlier, as the war in Ukraine and red-hot inflation impacted the post-Covid recovery.
Deutsche Bundesbank said it now expected the German economy to expand by 1.9% this year, down from the 2.5% it pencilled in last December, with 2023 and 2024 growth expected to reach 2.4% and 1.8%, respectively.
“Germany’s economic recovery is likely to continue, but at a considerably more subdued pace than projected last December,” the central bank said in its statement.
Finally on data, consumer price inflation was unchanged in China in May, according to fresh official data, while producer price growth slowed in line with expectations.
The National Bureau of Statistics said the consumer price index was unchanged at 2.1% year-on-year in May, just shy of consensus expectations for a rise of 2.2%.
At the same time, the producer price index slowed to 6.4% on the year in May, from a measure of 8% in April.
On London’s equity markets, banks were in focus after the Bank of England said the UK’s top lenders were no longer “too big to fail”, meaning that none would require a bailout in the event of a crisis.
However, it did find shortcomings at Lloyds Banking Group, HSBC and Standard Chartered over resolution plans, with the three closing down 2.43%, 2.48% and 2.51%, respectively.
Also included in the review were Barclays, NatWest, Santander UK, Virgin Money and Nationwide.
“The Bank’s assessment of resolvability shows that even if a major UK bank were to require resolution, customers would be able to keep accessing their accounts and business services as normal,” the Bank of England said.
Barclays ended the day down 3.69%, while NatWest Group fell 2.93% and Virgin Money UK slid 3.34%.
Elsewhere, miners were in focus with Anglo American falling 7.47% and Glencore down 5.2%.
Traders pointed to fresh Covid restrictions in parts of Shanghai and Beijing – China’s two largest cities – with the country a large consumer of metals.
Luxury car maker Aston Martin Lagonda was also 6.62% lower on fears of a slowdown in China, which is one of the firm’s key markets.
GKN owner Melrose Industries was 6.06% lower, having rallied earlier in the week after it launched a £500m share buyback.
On the upside, GSK rose 1.57% after it said its vaccine for respiratory syncytial virus (RSV) had shown “statistically significant and clinically meaningful efficacy” in adults aged 60 years and older in a phase 3 trial.
The company said the primary endpoint of the trial was “exceeded with no unexpected safety concerns observed”, adding that it would now start talks with regulators immediately, with submissions expected in the second half.
Investment outfit Apax Global Alpha jumped 11.73% after it revealed that the Apax X Fund, in which it is a limited partner, had sold its controlling stake in MyCase to AffiniPay.
Apax said the sale of MyCase, which provides cloud-based legal practice management software and payment services, valued its current look-through investment in the portfolio company at approximately €22.5m.
Outside the FTSE 350, ProCook Group tanked 40.26% after the kitchenware retailer warned on profits as consumers tightened their belts.
The company said it now saw adjusted pre-tax profit of between £4m and £6m for the 2023 financial year, down from an expected £10m in 2022.
Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.
Market Movers
FTSE 100 (UKX) 7,317.52 -2.12%
FTSE 250 (MCX) 19,673.32 -1.99%
techMARK (TASX) 4,283.35 -1.42%
FTSE 100 – Risers
Aveva Group (AVV) 2,434.00p 2.35%
Sainsbury (J) (SBRY) 213.30p 1.86%
Endeavour Mining (EDV) 1,853.00p 1.71%
Fresnillo (FRES) 748.40p 1.66%
GSK (GSK) 1,736.60p 1.57%
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Avast (AVST) 483.70p 0.42%
United Utilities Group (UU.) 1,046.00p 0.29%
Ocado Group (OCDO) 916.80p 0.15%
Unilever (ULVR) 3,639.50p 0.04%
FTSE 100 – Fallers
Anglo American (AAL) 3,613.00p -7.47%
Scottish Mortgage Inv Trust (SMT) 745.80p -6.63%
CRH (CDI) (CRH) 3,005.00p -6.33%
Melrose Industries (MRO) 154.35p -6.06%
Flutter Entertainment (CDI) (FLTR) 8,588.00p -5.33%
Glencore (GLEN) 505.50p -5.20%
InterContinental Hotels Group (IHG) 4,681.00p -4.92%
RS Group (RS1) 871.50p -4.70%
Abrdn (ABDN) 174.60p -4.67%
Prudential (PRU) 978.60p -4.42%
FTSE 250 – Risers
Apax Global Alpha Limited (APAX) 200.00p 11.73%
CMC Markets (CMCX) 265.00p 10.88%
ICG Enterprise Trust (ICGT) 1,080.00p 6.51%
Pantheon International (PIN) 275.00p 4.17%
NB Private Equity Partners Ltd. (NBPE) 1,430.00p 3.62%
Hochschild Mining (HOC) 112.50p 3.21%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,230.00p 2.53%
Abrdn Private Equity Opportunities Trust (APEO) 483.00p 2.33%
IG Group Holdings (IGG) 684.00p 2.09%
Vivo Energy (VVO) 143.00p 1.85%
FTSE 250 – Fallers
Ferrexpo (FXPO) 164.30p -8.67%
Trustpilot Group (TRST) 87.10p -7.83%
Aston Martin Lagonda Global Holdings (AML) 611.00p -6.62%
Kainos Group (KNOS) 1,136.00p -6.27%
Bridgepoint Group (Reg S) (BPT) 281.00p -6.15%
Carnival (CCL) 821.80p -6.04%
Liontrust Asset Management (LIO) 980.00p -5.95%
IWG (IWG) 230.50p -5.76%
PureTech Health (PRTC) 169.00p -5.59%
Travis Perkins (TPK) 1,125.50p -5.42%
