FTSE 100 drops as commodity-linked stocks weigh; Persimmon tumbles

"In 2023, prices are likely to come back, and if inflation keeps on going the way it is, that's going to be a double hit to margins" Energy firms shed 1.4%, while miners fell 0.9%, amid worsening COVID-19 outbreaks in China. Hilton Food Group sank 14.8% to the bottom of the domestically-oriented FTSE 250 index after flagging full-year operation profit expectations and wider macro-challenges.

The FTSE 100 index fell on Tuesday, dragged down by commodity-linked stocks on worries of softening demand from China, while Britain's second-largest housebuilder Persimmon tumbled as it warned of a hit to annual profit margins.

The export-oriented FTSE 100 fell 0.2% by 0940 GMT, with a 5.6% slide in Persimmon keeping the stock at the bottom of the index. The company flagged that house prices deteriorated and its sales rate slipped amid political and economic turmoil, and a deepening cost-of-living crisis. The FTSE 350 home construction sector index dropped 2.3%.

"It feels like reality is starting to catch up with the housebuilders," said Derren Nathan, head of equity research at Hargreaves Lansdown. "In 2023, prices are likely to come back, and if inflation keeps on going the way it is, that's going to be a double hit to margins"

Energy firms shed 1.4%, while miners fell 0.9%, amid worsening COVID-19 outbreaks in China. In a bright spot, Associated British Foods jumped 5.0% after the Primark owner reported a 42% surge in 2021-22 profit, while soft drinks bottler Coca-Cola HBC AG rose 3.7% after it raised its full-year profit forecast

Globally, caution prevailed in financial markets ahead of U.S. midterm elections, with analysts expecting a Republican victory which would lead to a potential split government. "My broad way of looking at it is that a strong boost in the U.S. stock would likely weaken the dollar and thereby strengthen the pound helping domestic companies in the UK," said Giles Coghlan, chief market analyst at HYCM.

Looking ahead, investors will also eye the third-quarter GDP data due on Friday to get hints about the UK economy's health. Hilton Food Group sank 14.8% to the bottom of the domestically-oriented FTSE 250 index after flagging full-year operation profit expectations and wider macro-challenges.