Inflation concerns bring FTSE down
The FTSE 100 Index fell by as much as 2% today after inflation concerns and weaker oil stocks combined to derail the London market’s recovery.
With the Dow Jones Industrial Average also expected to open marginally lower, the Footsie reached mid-morning 97.2 points lower at 5642.9.
The performance offered further evidence of market volatility, following the the Footsie’s 3% gain on Tuesday after a 0.75% cut in US interest rates.
The benchmark index, which tumbled 5% on Monday, lifted more than 100 points at the start of trading today before reversing the gain to stand as much as 102.1 points lower.
Sentiment weakened after minutes of the Bank of England’s most recent meeting highlighted the inflationary pressures facing policymakers. As a result just one member of the Bank’s monetary policy committee voted in favour of a rate cut.
Energy giants were responsible for much of the drop after weaker economic growth expectations caused oil prices to fall below 88 US dollars a barrel. Royal Dutch Shell and BP were both down by more than 4% – 80p at 1715p and 21.5p to 505p respectively.
Broadcaster ITV led the fallers board – down 5% or 3.6p to 70.1p – after a note from Bear Stearns warned of disappointing advertising revenues in 2008.
Prudential posted one of the biggest gains of the session after reports said Ping An, China’s second largest insurer, had expressed interest in a stake in the UK firm. Pru shares lifted 2%, or 14.5p to 633p, while another potential target – Aviva – was 7.5p higher at 594p.
Asia-facing banks rose for a second straight session as investors cheered the positive impact of the US rate cut. HSBC led the way with a gain of 20p to 760p, while Standard Chartered added 43p to 1577p.
