Interest rate woe and inflation weigh on markets

Markets across Europe drifted into the red as concerns over soaring inflation and higher interest rates held trading back.

The potential for further interest rate rises was already on traders’ minds after the Bank of England and European Central Bank (ECB) updates on Thursday but ratcheted further after a hot US labour report for December was reported on Friday afternoon.

Retail stocks had a weak showing in London as the likes of Kingfisher and Primark owner Associated British Foods were held back by concerns over how the rising cost of living will hit consumer spending.

The FTSE 100 ended the day down 12.44 points, or 0.17%, at 7,516.4 points.

Michael Hewson, chief market analyst at CMC Markets, said: “Having been dragged lower yesterday by the big tech-induced sell-off in US equity markets, European stocks initially opened higher in the wake of last night’s after-hours surge in US markets.

“These gains haven’t been able to endure, and in the face of rising European yields, we’ve slipped sharply lower as the day has progressed.”

Traders also appeared concerned over inflation after digesting worrying predictions from both the Bank of England and ECB.

The other major markets on the continent reported sharper falls, with the French Cac down 0.77% and German Dax 1.75% lower at the end of the session.

In the US, the main markets were mixed as the jobs data caused unease among equity traders.

Mr Hewson added that the FTSE was more resilient after oil-based rallies for Shell and BP, which saw its price surpass 400p for the first time since March 2020.

“The FTSE 100 has slipped back but is performing better relative to its European peers, due to outperformance from the energy sector, helped by crude oil prices pushing up to another seven-year high,” he said on Friday afternoon.

The price of Brent crude increased by 2.39% to 93.29 US dollars per barrel when the London markets closed.

Meanwhile, sterling made further gains versus the dollar despite the positive labour outlook as the US currency witnessed its biggest weekly slide since the pandemic first hit.

The pound was up 0.1% against the US dollar to 1.354, and increased 0.01% against the euro to 1.183.

In company news, Upper Crust owner SSP Group nudged higher after it said its recovery is still on track despite seeing January sales dented by the spread of the Omicron coronavirus variant.

The company, which also runs Caffe Ritazza, told shareholders that sales over the past eight weeks – from December 6 to January 30 – were at around 57% of the levels of two years ago. Shares moved 1.9p higher to 266.2p.

West End property giant Shaftesbury drifted after it said footfall and trading over December and January was impacted by Omicron restrictions.

Shares in the Carnaby and Chinatown landlord moved 6.5p lower to 607p.

The biggest risers on the FTSE 100 were Shell, up 77p at 2,037p; BP, up 13.5p at 405.9p; BT Group, up 6.4p at 192.45p; Avast, up 16.2p at 620p; and WPP, up 22p at 1,183.5p.

The biggest fallers were Intermediate Capital Group, down 80p at 1,846p; Kingfisher, down 12.8p at 313.4p; Lloyds Group, down 1.92p at 51.38p; Hargreaves Lansdown, down 47.5p at 1,307p; and B&M, down 18.2p at 555.2p.

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