Soaring UK inflation knocks FTSE 100

Stagflation is a real concern," said Danni Hewson, financial analyst at AJ Bell. "Consumers are in a lot of pain and beginning to realize that its not just going away anytime soon, there is not going to be some magic pill, not even an interest rate hike." Financial markets have currently priced in a near 100% chance that the Bank of England (BoE) will raise rates in December to 0.25% from the record low of 0.1%. Supply chain snarls and inflationary pressures have weighed on the FTSE 100 in recent months, leading it to underperform its European peers.


Reuters | London | Updated: 17-11-2021 15:59 IST | Created: 17-11-2021 15:39 IST
Soaring UK inflation knocks FTSE 100
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UK's FTSE 100 index slipped on Wednesday as a surge in British inflation to the highest level in a decade fuelled bets that the central bank will raise interest rates as early as next month.

British consumer prices posted a bigger-than-expected 4.2% jump last month in annual terms, from a 3.1% increase in September, as household energy bills soared. The FTSE 100, many of whose constituents draw a large part of their revenue in dollars, slipped 0.3% as the sterling hit a one-week high against the greenback.

Exporters Unilever, Reckitt Benckiser, and British American Tobacco were down nearly 1% each. "We are getting to high pay, low unemployment, and high price situation. Stagflation is a real concern," said Danni Hewson, financial analyst at AJ Bell.

"Consumers are in a lot of pain and beginning to realize that it's not just going away anytime soon, there is not going to be some magic pill, not even an interest rate hike." Financial markets have currently priced in a near 100% chance that the Bank of England (BoE) will raise rates in December to 0.25% from the record low of 0.1%.

Supply chain snarls and inflationary pressures have weighed on the FTSE 100 in recent months, leading it to underperform its European peers. The blue-chip index has just added 13.2% so far in 2021, compared with a 22.8% rise in the pan-European STOXX 600. "There is no doubt that the BoE will need to raise the base rate very shortly. However, there is a risk that we extrapolate the sharp rise in CPI too far into the future," said Edmund Shing, global chief investment officer at BNP Paribas.

"A lot of this current inflation pressure is due to supply chain disruptions and production shortages, which should ease over the next few months." Energy stocks slipped 0.9% after U.S. gasoline stocks fell more than expected last week, heightening pressure on the Biden administration to release oil from emergency reserves.

British renewable power generator and network operator SSE Plc fell 4.0% after reporting a 25% drop in renewable power output.

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

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