London stocks were still firmly in the red by midday on Friday, having taken their cue from a weak session on Wall Street after data showed that US inflation hit its highest level in January since 1982.
The FTSE 100 was down 0.8% at 7,612.56.
Russ Mould, investment director at AJ Bell, said: “It’s been quite a week for the markets with a shock from US inflation growing faster than expected, and now we’ve got confirmation that Omicron tripped up the UK economy in December, albeit by a smaller amount than forecast.
“Last night on Wall Street, US stocks took a tumble on fears that the high inflation rate could prompt the Federal Reserve to be more aggressive with its interest rate hikes.
“This week’s US inflation numbers have pushed up the Vix ‘fear’ index once again, indicating that investors expect more volatile market conditions. In a nutshell that means more ups and downs with share prices.
“Ever since the pandemic struck, we’ve become accustomed to wild share price swings on the market and a 1% daily move is no longer considered a very good or bad day. It’s become part of the furniture.
“Investors have become jumpy which explains the over-reaction to any bits of good or bad news from companies. Day traders might like the volatility, but long-term investors are going to have to dial out even more noise than normal.”
Figures released earlier by the Office for National Statistics showed the economy shrank less than expected in December as activity to combat the Omicron variant helped offset the virus’s impact on services.
Output fell 0.2% from November to December in the largest contraction since January 2021. The drop was smaller than the 0.6% average decline forecast by economists in a Reuters poll.
Services output fell 0.5%, driven by a 3.2% drop in wholesale and retail trade, where footfall was affected by the spread of the Omicron variant. Accommodation and food services output dropped 9.2% as people cancelled trips and stayed away from pubs and restaurants.
The effect of Covid-19 on services was partly offset by growth in coronavirus testing and vaccinations, which together added 0.7 percentage point to gross domestic product.
The data showed that in 2021, the economy grew 7.5% despite the contraction in December. The yearly rebound followed a 9.4% fall in 2020 as the economy was dented by Covid lockdowns and restrictions.
“GDP fell back slightly in December as the Omicron wave hit with retail and hospitality seeing the biggest impacts,” Darren Morgan, the ONS’s director of economic statistics, said. “However, these were partially offset by increases in the test and trace service and vaccination programmes.”
In equity markets, Chilean copper miner Antofagasta was the top gainer on the FTSE 100 after an upgrade to ‘overweight’ at Barclays.
Food products group Tate & Lyle surged after it reported a rise in revenues in the final three months of 2021 as it reiterated guidance and said it remained on track to create two businesses by the end of March.
British American Tobacco edged higher after saying it would buy back £2bn of shares as it reported higher annual profit.
On the downside, Rotork was knocked lower by a downgrade to ‘hold’ Jefferies.
Victrex lost ground despite saying it had seen a “solid” start to the year, with first-quarter revenues up 9%.
Market Movers
FTSE 100 (UKX) 7,612.56 -0.78%
FTSE 250 (MCX) 21,982.69 -1.01%
techMARK (TASX) 4,419.75 -0.77%
FTSE 100 – Risers
Antofagasta (ANTO) 1,381.00p 2.71%
Unilever (ULVR) 3,857.00p 2.06%
Evraz (EVR) 439.20p 1.74%
B&M European Value Retail S.A. (DI) (BME) 566.40p 1.11%
Entain (ENT) 1,696.00p 0.95%
Flutter Entertainment (CDI) (FLTR) 11,135.00p 0.77%
Airtel Africa (AAF) 145.00p 0.69%
Informa (INF) 619.40p 0.58%
Reckitt Benckiser Group (RKT) 5,866.00p 0.57%
Imperial Brands (IMB) 1,796.50p 0.34%
FTSE 100 – Fallers
SEGRO (SGRO) 1,242.00p -3.83%
London Stock Exchange Group (LSEG) 6,914.00p -3.68%
Fresnillo (FRES) 613.80p -2.82%
Polymetal International (POLY) 1,097.00p -2.75%
Spirax-Sarco Engineering (SPX) 12,330.00p -2.72%
Experian (EXPN) 2,954.00p -2.67%
Barclays (BARC) 203.15p -2.64%
Scottish Mortgage Inv Trust (SMT) 1,076.50p -2.36%
British Land Company (BLND) 539.40p -2.35%
Halma (HLMA) 2,373.00p -2.31%
FTSE 250 – Risers
Tate & Lyle (TATE) 745.40p 8.00%
PureTech Health (PRTC) 285.00p 3.83%
Chrysalis Investments Limited NPV (CHRY) 194.50p 2.91%
Capricorn Energy (CNE) 210.20p 1.74%
Diversified Energy Company (DEC) 116.20p 1.22%
Weir Group (WEIR) 1,698.00p 1.07%
PZ Cussons (PZC) 204.00p 0.99%
Apax Global Alpha Limited (APAX) 212.00p 0.95%
Petershill Partners (PHLL) 218.00p 0.93%
Indivior (INDV) 222.40p 0.91%
FTSE 250 – Fallers
Trustpilot Group (TRST) 154.00p -5.29%
Aston Martin Lagonda Global Holdings (AML) 1,142.00p -4.36%
Petropavlovsk (POG) 15.04p -4.26%
TP Icap Group (TCAP) 130.20p -4.05%
Rotork (ROR) 320.40p -3.67%
Reach (RCH) 250.50p -3.28%
Discoverie Group (DSCV) 840.00p -3.23%
Micro Focus International (MCRO) 452.40p -2.94%
Baillie Gifford US Growth Trust (USA) 239.00p -2.85%
IWG (IWG) 279.90p -2.81%
