FTSE 100 recovers ground amid mini-budget U-turn speculation

It has been a rollercoaster session for the FTSE 100 which hit its lowest point in 19 months on Thursday.

The city’s top index plunged after new data revealed the US inflation rate surpassed market expectations in August.

It dropped to a low of 6,708 in early afternoon, beating the most recent low in March, around the time that Russia invaded Ukraine.

By the end of the day, it had clawed back some of its earlier losses, despite the Chancellor shutting down speculation that he could U-turn on his controversial fiscal policies.

It closed 24.12 points higher, or 0.35%, at 6,850.27.

There had been a fresh wave of speculation that the Government could scrap major parts of its tax-cutting fiscal plan including raising corporation tax, after it first prompted turmoil in the financial markets.

But Kwasi Kwarteng stood firm and said he was “totally focused” on delivering the mini-budget.

The FTSE was pulled up by a stronger performance for the banks and housebuilders after bond yields eased – meaning that the interest on Government loans has gone down – on the penultimate day of the Bank of England’s bond-buying programme.

Chris Beauchamp, chief market analyst at online trading platform IG, said: “Hopes of a rebound in stocks have been dashed again as US inflation came in above forecasts. And once more, the ‘core’ figure excluding food and energy has risen above estimates.

“Meanwhile the UK Government’s torrid time goes on.

“It looks like the market is pricing in a rising probability that a major U-turn (and even potentially several U-turns) are likely, improving the UK’s fiscal outlook while simultaneously leaving the new Prime Minister and her Chancellor looking like they are unable to control events.”

The pound rallied more than 2.2% against the dollar, hitting 1.1343 dollars when European markets closed.

Sterling also strengthened against the euro and was up around 1.48% to 1.1604.

European markets closed in the green, with the German Dax up 1.51% and the French Cac 1.14% higher.

US markets were also making early gains despite the worse-than-expected inflation reading. The S&P 500 was up by 1.53% at Dow Jones was 1.72% higher.

In company news, betting giant Entain told investors that its net gaming revenues were up 2% over the past three months as it eyed up boosted sales from the upcoming football World Cup.

The Ladbrokes and Coral owner saw its share price move up by more than 4% after reporting a record level of active customers during the third quarter.

Budget airline easyJet revealed that it expects to narrow its full-year losses after swinging to a profit of between £470 million and £490 million over the latest quarter.

It reassured investors that demand for flights was resilient and that people are hunting for lower-cost holidays as incomes are squeezed.

Its share price was up by 2.67% at close.

Meanwhile, recruitment firm Hays warned investors over a hiring slowdown as it said economic uncertainty was impacting activity in the UK and the US.

It came a day after a similar alarm was sounded by rival PageGroup which also pointed to waning confidence among businesses recruiting across most of its markets worldwide.

But Hays said it had a record performance in its first quarter and its share price was up by 3.78%.

The biggest risers on the FTSE 100 were Ocado Group, up 42.7p to 435.8p, International Consolidated Airlines Group, up 8.04p to 108.8p, NatWest Group, up 16.3p to 228.7p, Lloyds Banking Group, up 2.68p to 41.77p, and Legal & General Group, up 13.2p to 217.3p.

The biggest fallers on the FTSE 100 were Fresnillo, down 31p to 728.2p, Halma, down 65p to 2,015p, Endeavour Mining, down 46p to 1,481p, Relx, down 63p to 2,157p, and Croda International, down 180p to 6,362p.