Bad inflation and interest rise news spooks traders as FTSE dips by nearly 2 per cent
THE FTSE 100 dipped nearly two per cent today as traders reacted to more bad news on inflation.
Although the headline rate fell to 8.7 per cent in April, the core inflation figure — which strips out food and energy prices — climbed to a 31-year high of 6.8 per cent.
Food inflation fell just a fraction and stayed at a painful 19.1 per cent, with many staples soaring twice that.
Milk, cheese and eggs are up 29.3 per cent on this time last year, olive oil 46.4 per cent and sugar 47.4 per cent.
The figures mean that lowering inflation will be tough in the short term, and markets fear that will mean more interest rate rises.
The Bank of England has already raised rates 12 times in a row, lifting them to 4.5 per cent this month to try to curb inflation.
Many experts expect a fresh hike next month when it makes its next decision.
Danni Hewson, head of financial analysis at AJ Bell, said: “With core inflation heading the wrong way it sets the scene for at least one more interest rate hike.
“And there’s speculation the Bank might go as high as a 5.5 per cent base rate to complete its task.”
Samuel Tombs at Pantheon Macroeconomics said April’s inflation decrease was “too small a drop” to prevent a June hike.
But that’s not definite, reckons ING’s James Smith, “not least because we still have another set of data” before then.
Remaining optimistic, he added that jobs and wages data have been moving in the right direction.
Government bond rates, meanwhile, jumped on the inflation news with 10-year gilts climbing to 4.3 per cent — edging closer to the 4.63 per cent last seen in October when Liz Truss was still PM.
RAINING ON B&Q’S PARADE
KINGFISHER, the owner of both B&Q and Screwfix, has blamed recent poor weather for its sales slump.
In the three months to the end of April, sales at B&Q fell 1.5 per cent to £980million — a result of people buying less garden furniture because of the rain.
Garden items usually account for a fifth of the firm’s sales — but it said its core “big ticket” categories are showing “continued resilience”.
Thanks to Screwfix and its foreign businesses, Kingfisher recorded a 0.8 per cent rise in revenue to £3.3billion — which means profits for the year are expected to be in the region of £634million.
Boss Thierry Garnier said the company’s costs will rise slower in the second half of the year as raw materials and freight stop soaring so rapidly, easing the pressure on prices.
“We are maintaining a sharp focus on competitive pricing, while balancing inflationary pressures,” Garnier said.
SHARES
BARCLAYS down 4.78 at 158.66
BP down 1.80 at 486.50
CENTRICA down 2.40 at 113.60
HSBC down 17.60 at 600.20
LLOYDS down 0.83 at 46.77
MARKS & SPENCER up 21.15 at 184.75
NATWEST down 5.90 at 268.10
ROYAL MAIL down 3.65 at 196.95
SAINSBURY’S up 0.90 at 278.90
SHELL down 25.50 at 2,392.50
TESCO down 2.40 at 265.70
BANKS IN BOND RAP
FIVE banks broke the law by sharing sensitive information about UK government bond trading in online chatrooms, a watchdog has claimed.
Citi, Deutsche Bank, HSBC, Morgan Stanley and RBC unlawfully swapped info between 2009 and 2013, the Competition and Markets Authority said.
The conversations could have led to price-fixing.
If found guilty, the banks could face huge fines.
CARS UP A GEAR
CAR making is up for the third month running as short-ages in supplies such as semiconductors continue to ease.
Production climbed to 66,527 in April, up almost 6,000 on the month last year, said the Society of Motor Manufacturers and Traders.
Exports drove production, with more than four out of five cars built in this country heading overseas — and in particular to Europe.
Richard Peberdy, of KPMG, said: “The UK car industry’s post-pandemic recovery continues, with export growth a major factor.”
SSE, the Perth-based energy giant, said it will spend £40billion over the next decade boosting its infrastructure — which could create more than 1,000 green jobs every year.
Operating profits climbed to £2.53billion in the last 12 months.
PAD COSTS SLOW
THE average UK house price rose 4.1 per cent in the year to March, down from 5.8 per cent to February, according to official figures from the ONS.
The average property value was £285,000, £11,000 higher than a year ago but £8,000 below a recent peak last November.
The average price was £304,000 in England — up 4.1 per cent over the year.
It was £214,000 in Wales, £185,000 in Scotland and £172,000 in Northern Ireland.
The South West of England saw the highest annual percentage change.
M&S ‘ON TRACK’
MARKS & SPENCER boss Stuart Machin reckons his turnaround plans are on track as unprofitable branches close, new ones open and millions sign up to its app.
And its shares soared more than 13 per cent yesterday — one of the stock market’s few major risers.
Revenue has climbed 9.6 per cent to £11.9billion in the last year.
Pre-tax profits rose to £475.7million, from £391.7million.
Asked about inflation Mr Machin said: “We expect things to get a bit better.”
PAY’S NOT THAT LIDL
LIDL will hand 24,500 workers their third pay rise in 12 months in September.
Store and warehouse staff will get £11.40 an hour, £12.85 in London, and up to £13.15 for those with long service.
That will make it the UK’s highest paying supermarket, Lidl claimed.
The company is recruiting 1,500 warehouse workers and plans a distribution centre in Leeds which will create another 400 jobs.