London market drifts lowers as traders strike cautious tone
The FTSE 100 Index closed down 9.05 points to 7,168.01.
London’s premier index drifted lower on Tuesday as a choppy session for global markets left US and European indexes in the red.
The FTSE 100 Index closed down 9.05 points to 7,168.01, as investors struck a cautious tone following a string of sell-offs in recent sessions sparked by the prospect of interest rate rises across the globe.
Concerns that rising inflation may cause central banks to tighten monetary policy, particularly in the United States, has left investors spooked, leading to volatile swings and trillions of pounds to be wiped off global markets.
On Wall Street, the Dow Jones Industrial Average was off 0.5% and the S&P 500 endured a 0.3% fall.
European markets were also suffering, with Germany’s Dax and the Cac 40 in France down 0.7% and 0.6% respectively.
In currency, sterling was 0.5% higher versus the US dollar as inflation unexpectedly held steady at 3% in December, ratcheting up pressure on the Bank of England to hike rates as soon as May.
While the ONS reported signs of weaker price rises for fuel and food in January, those were offset by a shallower fall in leisure costs.
Clothing prices helped to prop up the inflation figure despite having fallen 3.7% month on month, which marked a weaker drop compared with the 4.3% fall during the same period a year earlier.
Despite boosting its performance against the greenback, the pound was down 0.2% versus the euro at 1.123.
The pound spiked even further northwards after inflation figures beat expectations, however the effects were short-lived Fiona Cincotta, City Index market analyst
Fiona Cincotta, City Index market analyst, said: “The pound spiked even further northwards after inflation figures beat expectations, however the effects were short-lived.
“A higher inflation reading, coming to a back drop of a more hawkish sounding BoE would normally send the pound soaring.
“The fact that it didn’t, suggests that market participants are at least cautious of the ability of the UK economy to sustain sooner and faster rate rises in the face of Brexit uncertainties.”
The price of oil shifted south as traders digested predictions from the International Energy Agency suggesting record US production could cause output to outstrip a potential rise in demand. Brent crude was down 0.3% to 62.46 dollars a barrel.
In UK equities, the sun was shining on travel stocks as holiday giant TUI narrowed its losses during a first quarter.
Shares in the group rose by more than 1%, or 19.5p to 1,614p, after it saw a “resilient” demand for its holidays from UK customers, despite hiking winter travel prices to make up for the weak pound.
Pre-tax losses narrowed from 103.3 million euro (£91.8 million) to 72.5 million euro (£64.4 million) for the period.
On the second tier, shares in Pendragon surged more than 11% despite full-year profits slumping after a slowdown in new vehicle sales.
The firm was up 2.5p to 23.4p, as it booked a near 20% fall in pre-tax profits to £60.4 million in 2017 as new vehicle revenue fell 4.9%.
Pendragon pointed to a “challenging economic environment and lower consumer confidence”, particularly in the third quarter.
However, investors saw through the financial woes after the group hiked its dividend for 2017.
The biggest risers on the FTSE 100 Index were Just Eat up 30.80p to 853.2p, WPP up 46p to 1,335.5p, Glencore up 9.10p to 375.8p, Evraz up 8.30p to 360.6p.
The biggest fallers were Severn Trent down 60.50p to 1,725.5p, United Utilities down 21.20p to 663.6p, Hargreaves Lansdown down 44p to 1,640.5p, RELX down 34.5p to 1,455p.