Record inflation pressures keep FTSE 100 subdued

UK bank stocks, which perform better when interest rates are higher, were among the handful of gainers by 0825 GMT. Other value stocks including energy and miners have also logged gains this week, tracking their U.S. peers as the Federal Reserve sought to calm market volatility that was triggered by its surprisingly hawkish tone to monetary policy last week.

London's FTSE 100 was muted on Wednesday as economic data showed inflation pressures hit record levels this month, while gains in travel and mining stocks offset a slide in homebuilders.

The preliminary reading of the IHS Markit/CIPS UK Composite Purchasing Managers' Index (PMI) pointed to one of the strongest monthly improvements in business activity since 1998. The FTSE 100 index inched 0.2% higher with economically sensitive mining stocks including BHP Group and Anglo American providing the biggest boost, while travel stocks jumped nearly 7%.

The domestically focussed mid-cap index slid 0.1%. "Investors are still testing waters and as interest for value stocks rises, UK equities stand to perform better in the short term," said Andrea Cicione, head of strategy at TS Lombard.

A recent rise in inflation has kept the FTSE 100 pinned near the 7,000 mark, although easing lockdown restrictions and attractive stocks valuations have revived demand for stocks that stand to benefit from a steady economic recovery. UK bank stocks, which perform better when interest rates are higher, were among the handful of gainers by 0825 GMT.

Other value stocks including energy and miners have also logged gains this week, tracking their U.S. peers as the Federal Reserve sought to calm market volatility that was triggered by its surprisingly hawkish tone to monetary policy last week. "Markets had been a bit shaken by inflation worries but they seem to have calmed quite a bit and the reflation trade is to come back with decent gains in sectors like financials," said Cicione.

Homebuilders dropped 1.3%, making them the worst performing sector with Persimmons among the top losers in the index. The drop came after Persimmon and insurer Aviva agreed to measures suggested by Britain's competition regulator as part of its long-running investigation into possible mis-selling of leasehold homes and high ground rents.

Homebuilder Berkeley Group Holdings Plc also dropped 1.2% despite reporting a rise in annual profit that was spurred by demand for new homes due to supportive government measures during the pandemic.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)