FTSE inches to gains despite soaring inflation weighing on sentiment

The FTSE outperformed its global rivals to edge marginally higher despite spending most of the session in the red.

The index of top firms dropped sharply when the markets opened on Wednesday as traders and investors were swallowing a 30-year-high inflation rate of 7%.

Housebuilders and retail stocks had weak performances amid concerns that soaring inflation will weaken consumer confidence further.

London’s top flight ended the day up 4.14 points, or 0.05%, at 7,580.8 points.

Michael Hewson, chief market analyst at CMC Markets UK, said: “It’s been another disappointing session for European markets today, sliding back after another strong inflation report, this time from the UK, as investors worry about the effect a continued acceleration in prices might have on consumer incomes, and ergo company profit margins.

“The FTSE 100 is outperforming, helped largely by resilience in basic resources and energy.

“Today’s bigger-than-expected rise in headline inflation has also impacted on house builders, over concerns that the Bank of England will have to raise rates faster than expected, potentially pushing up the cost of mortgages.”

Taylor Wimpey, Persimmon, Barratt and Berkeley all finished lower as a result.

In continental Europe, traders appeared jittery ahead of a Thursday European Central Bank meeting where committee members could suggest a rate rise might be on the horizon.

The Cac was up 0.07% and the German Dax decreased 0.34% by the end of the session.

Across the Atlantic, US stocks opened lower after the latest Producer Price Index figures suggested inflation is not yet peaking.

Meanwhile, sterling held up particularly well despite the hot inflation as traders now seem accustomed to ONS inflation readings coming significantly above analyst forecasts.

The pound increased by 0.25% against the dollar to 1.307, and rose 0.03% against the euro to 1.202.

In company news, Tesco dropped after the retail giant warned earnings will come under pressure from soaring inflation and as it battles to keep prices low for cash-strapped shoppers.

The supermarket group said retail operating profits are set to fall by up to 9% in the year to next February, with the group facing rising costs for fuel and energy, and as suppliers hike their prices.

Shares dropped by 5.4p to 265.2p, and resulted in dips for grocery rivals including Ocado and Sainsbury’s.

Ted Baker shares made gains after the fashion firm confirmed that private equity suitor Sycamore Partners has said it will take part in its formal sale process.

Shares were 4.8p higher at 152.6p at the close of play as a result.

Darktrace shares slumped again despite the cyber security business lifting its full-year revenue forecasts after taking on new customers.

Shares closed 52.7p lower at 399.8p  after initially opening higher.

The price of oil continued its rebound after Russian President Vladimir Putin said that peace talks with Ukraine were a “dead-end situation”.

Brent crude increased by 2.59% to 107.35 US dollars per barrel when the London markets closed.

The biggest risers on the FTSE 100 were IAG, up 5.12p at 140.3p, Fresnillo, up 23p at 822.8p, Electrocomponents, up 28p at 1,052p, Coca-Cola HBC, up 37.5p at 1,599.5p, and Smiths, up 30p at 1,437p.

The biggest fallers of the day were Hargreaves Lansdown, down 27.7p at 973.8p, Ocado, down 31p at 1,153.5p, Abrdn, down 5.3p at 197.3p, Sainsbury’s, down 6p at 238.6p, and BT, down 4.7p at 189p.