London close: Stocks still weaker after inflation-fuelled sell-off

London stocks closed slightly weaker on Friday, amid global losses that came on the back of data that showed US inflation hitting its highest level since 1982 in January.

The FTSE 100 ended the session down 0.15% at 7,661.02, and the FTSE 250 was 0.72% lower at 22,048.71.

Sterling was heading northwards, meanwhile, last trading up 0.32% on the dollar at $1.36, and strengthening 0.51% against the euro at €1.1928.

“The sight of some small gains for stocks after yesterday’s sharp reversal is normally a welcome sight, but with the [VIX] volatility index rising again it looks like this bounce could be brief,” said IG chief market analyst Chris Beauchamp.

“Traders, investors and strategists are falling over themselves to make guesses as to where US interest rates will be by the end of the year and suddenly a multitude of rate increases now looks to be the norm rather than a left-field guess.

“The afternoon bounce in US stocks has already started to fade, and while the usual Friday jitters cannot be discounted it doesn’t exactly look like a rush to go bargain-hunting is currently in progress.”

Following Thursday’s strong inflation print out of the United States, Goldman Sachs said it was expecting the US Federal Reserve to lift interest rates seven times this year, up from a previous forecast for five rate hikes.

Goldman said it expected the US central bank to raise rates by 25 basis points each time.

“We see the arguments for a 50bp rate hike in March," it said in a note.

“The level of the funds rate looks inappropriate, and the combination of very high inflation, hot wage growth, and high short-term inflation expectations means that concerns about falling into a wage-price spiral deserve to be taken seriously.”

GS said it could imagine the Federal Open Market Committee concluding that even a meaningful risk of an outcome as serious as a wage-price spiral requires a more aggressive and immediate response.

"So far, though, most Fed officials who have commented have opposed a 50 basis point hike in March. We therefore think that the more likely path is a longer series of 25 basis point hikes instead.”

On home shores, official figures released earlier showed the UK economy shrinking 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 Office for National Statistics said.

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.

Manufacturing output rose 0.2% and construction increased 2%.

“GDP fell back slightly in December as the Omicron wave hit with retail and hospitality seeing the biggest impacts,” Darren Morgan, ONS 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 rose 1.64% after an upgrade to ‘overweight’ at Barclays.

Food products group Tate & Lyle leapt 9.53% after it reported a rise in revenues in the final three months of 2021, reiterated its guidance, and said it remained on track to create two businesses by the end of March.

British American Tobacco gained 3.04% after saying it would buy back £2bn of shares as it reported higher annual profit.

Consumer goods giant Unilever added 3.59%, with CMC Markets analyst Michael Hewson pointing to the company’s full-year results earlier in the week, and the stock’s recovery after repeated failed bids for GlaxoSmithKline.

"The decision by management to rule out the prospect of an acquisition appears to have prompted investors to allow the benefit of the doubt to management, as they look to embark on a turnaround plan,” Hewson said.

“There is also the fact that despite the sound and fury of recent events, the shares still look cheap on a relative basis.”

On the downside, Rotork was knocked 3.07% lower by a downgrade to ‘hold’ Jefferies, while Victrex lost 1.95% despite saying it had seen a "solid" start to the year, with first-quarter revenues up 9%.

Property investment and development company Segro was off 3.48% by the end of trading, ahead of its full-year results next Friday.

Aston Martin Lagonda closed down 2.97% after chair Lawrence Stroll said the luxury car maker would take longer than originally expected to build its Valkyrie hypercars.

Speaking to the Financial Times, Stroll said the flagship cars, set to cost more than £2.5m each, would take longer than expected to make even after early production hurdles had been cleared.

"Everything has been resolved, but they’re taking a little longer to build because we want them perfect," he told the FT.

"We have a complexity issue in building the car. We overestimated the amount of cars we could build until we started building."

Market Movers

FTSE 100 (UKX) 7,661.02 -0.15%
FTSE 250 (MCX) 22,048.71 -0.72%
techMARK (TASX) 4,436.76 -0.39%

FTSE 100 - Risers

Unilever (ULVR) 3,916.00p 3.59%
British American Tobacco (BATS) 3,367.00p 3.04%
Evraz (EVR) 444.70p 3.01%
Flutter Entertainment (CDI) (FLTR) 11,360.00p 2.81%
Airtel Africa (AAF) 148.30p 2.64%
B&M European Value Retail S.A. (DI) (BME) 571.40p 2.00%
Antofagasta (ANTO) 1,366.50p 1.64%
BP (BP.) 417.20p 1.58%
Imperial Brands (IMB) 1,818.50p 1.56%
Kingfisher (KGF) 321.40p 1.23%

FTSE 100 - Fallers

Spirax-Sarco Engineering (SPX) 12,195.00p -3.79%
Experian (EXPN) 2,919.00p -3.62%
SEGRO (SGRO) 1,247.00p -3.48%
Ashtead Group (AHT) 4,969.00p -3.06%
Halma (HLMA) 2,370.00p -2.88%
Aveva Group (AVV) 2,801.00p -2.74%
Electrocomponents (ECM) 1,036.00p -2.72%
Prudential (PRU) 1,214.00p -2.41%
JD Sports Fashion (JD.) 174.85p -2.35%
Bunzl (BNZL) 2,687.00p -2.18%

FTSE 250 - Risers

Tate & Lyle (TATE) 756.00p 9.53%
PZ Cussons (PZC) 208.00p 2.97%
Wood Group (John) (WG.) 243.90p 2.57%
PureTech Health (PRTC) 280.50p 2.19%
Chrysalis Investments Limited NPV (CHRY) 193.50p 2.12%
Baillie Gifford Japan Trust (BGFD) 879.00p 1.97%
Diversified Energy Company (DEC) 117.00p 1.92%
Premier Foods (PFD) 119.00p 1.88%
Lancashire Holdings Limited (LRE) 548.00p 1.58%
CMC Markets (CMCX) 228.50p 1.56%

FTSE 250 - Fallers

Hipgnosis Songs Fund Limited C Shs NPV (SONC) 112.50p -100.00%
Wizz Air Holdings (WIZZ) 4,606.00p -5.10%
Reach (RCH) 247.00p -4.63%
Oxford Biomedica (OXB) 778.00p -4.58%
Petropavlovsk (POG) 15.00p -4.52%
Trustpilot Group (TRST) 156.00p -4.06%
Liontrust Asset Management (LIO) 1,584.00p -3.31%
Rotork (ROR) 322.40p -3.07%
Unite Group (UTG) 1,022.00p -2.99%
Aston Martin Lagonda Global Holdings (AML) 1,158.50p -2.97%