Inflation hike hits FTSE
The rise in UK inflation to an eight-year high sent investors scurrying to the sidelines today in a disappointing session for blue-chip stocks.
Petrol prices were behind the increase in inflation to 2.4% in August, which analysts believe will quieten calls among members of the Bank of England for more rapid cuts in interest rates.
Publication of the data led to the FTSE 100 Index doubling its early losses to stand 37 points lower at 5338.1 by mid-morning.
Little support was being offered from elsewhere in the world where markets in the United States and Japan closed near their opening marks.
Insurance firm Friends Provident was a rare bright spot on the Footsie, gaining 2p to 175p after pleasing investors with a 46% rise in half-year profits.
But positive comments about insurance markets failed to ignite the rest of the sector where Prudential was 5.5p weaker at 511p and Legal & General gave up 0.5p to 111.5p.
The clouds above the insurance sector were also keeping the banking industry in the shade, with Royal Bank of Scotland and HBOS among those on the back foot today – off 5p and 12.5p at 1623p and 858p respectively.
With crude prices falling for the third day in a row amid signs that US demand is starting to tail off, BP dropped 9p to 630p and Royal Dutch Shell eased 19p to 1812p.
Elsewhere, French Connection rose 12% or 30p to 275p as investors expressed relief that there was not another profits warning and agreed that the clothing retailer’s chances of a recovery were encouraging.
Redrow helped a clutch of housebuilders recover some of their losses of the previous session by reporting that its profits were 7% higher during the second half of its financial year.
Shares in the sector were hit by a disappointing update from Bovis Homes yesterday, but a gain of 5.5p to 425.5p by Redrow today was matched by a 4.5p rise to 606.5p by Bovis.
