Inflation fears persist as traders brace for US interest rate rises

Traders appeared spooked by a new UN report that suggested food prices have risen at their fastest level in 60 years and look set to keep soaring due to the war in Ukraine restricting food supplies.

The country is a major producer of sunflower oil, which is pushing up the price of alternatives globally, along with being a major source of wheat and corn.

As a result, investors seemed convinced the US fed will raise interest rates this year to tackle soaring inflation.

This caused the US dollar index, which tracks against six global currencies including sterling and the euro, to hit a two-year high.

Conversely this sent the FTSE 100 up by 117.75 points, or 1.56%, to 7669.56 on Friday as a weaker pound make stocks more attractive to foreign investors who tend to spend in dollars.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Today’s positive session for European markets appears to have more to do with the fact that the strength of the US dollar has pushed both the pound and the euro lower, with the pound falling to its lowest levels since November 2020.”

As markets closed a pound was worth 1.303 dollars and 1.198 euros.

The FTSE 100 also benefitted from having several commodity-based businesses, which tend to be protected from inflation, with some of the highest risers including Anglo American, Shell and BP.

The prospect of higher interest rates also helped banks including Standard Chartered and Barclays close up 14.8p at 509.2p and 4.02p at 144.6p respectively.

Similar sentiment was felt in Europe with the German Dax closing up 1.46% and the French Cac up 1.34%.

A barrel of Brent Crude cost 101.27 dollars as markets closed, up 0.57% on the day.

In company news, accounting giant Deloitte announced it has resigned as the auditor of mining giant Polymetal International due to the firm’s ties to Russia.

The London-listed firm, which primarily operates in Russia, has seen its shares plummet since Vladimir Putin launched a full-scale invasion of Ukraine more than a month ago.

Shares closed up 6p at 296p.

Shares in holiday giant Jet2 soared after the company said the relaxation of UK travel restrictions led to a significant increase in bookings in February and March, although the firm still expects a bumper loss for the past year.

The company said bookings for the period approached “seasonal norms as customer confidence in travelling internationally rallied”.

Shares closed up 73.5p at 1,231.5p.

Hollywood Bowl also revealed a strong period with pent-up demand driving the leisure firm to a record half-year performance.

Sales jumped to £91.3 million for the six months to March, compared with £12 million over the same period a year earlier as it was hit by Covid restrictions, sending shares to close up 15.5p, or 5.9%, at 276.5p.

The biggest risers on the FTSE 100 were Anglo American, up 192.5p to 4170.5p, Shell, up 82p to 2,168p, CRH, up 112.5p to 3,023p, BP, up 14.1p to 391.5p, and Next, up 198p to 336.6p.

The biggest fallers on the FTSE 100 were Dechra Pharmaceuticals, down 136p to 4,136p, Intertek, down 160p to 5,154p, Spirax-Sarco, down 285p to 12,710p, Severn Trent, down 42p to 3,131p, and Halma, down 32p to 2,532p.