London open: Stocks slump as inflation hits fresh 40-year high

(Sharecast News) - London stocks slumped in early trade on Wednesday after data showed that UK inflation hit a fresh 40-year high in May as energy and food prices continued to surge. At 0835 BST, the FTSE 100 was 1.5% lower at 7,046.14, while sterling was down 0.8% against the dollar at 1.2176.

According to figures released earlier by the Office for National Statistics, consumer price inflation ticked up to 9.1% from 9% in April. This marked the highest level since March 1982 and was in line with analysts' estimates.

ONS chief economist Grant Fitzner said: "Though still at historically high levels, the annual inflation rate was little changed in May.

"Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year and a drop in often fluctuating computer games prices.

"The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record."

On a monthly basis, consumer price inflation increased 0.7% in May, compared with a rise of 0.6% in May 2021.

After lifting interest rates to a 13-year high of 1.25% last week, the Bank of England warned that inflation could hit 11% this autumn. This was up from a previous forecast of 10%.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The latest temperature check of the UK economy shows the mercury rising again, with no end yet in sight to feverish price rises.

"May's rise in inflation was smaller compared to the jump we saw in April, so although the pace of rate rises looks set to continue, the Bank may hold off from bringing in a larger hike of 0.5% for the time being. The pound has slipped back against the dollar, down to $1.22 compared to $1.23 earlier yesterday and worries are mounting that this could flame inflation further by making imported goods even more expensive."

In equity markets, miners were on the back foot as copper prices fell, with Glencore, Anglo American and Antofagasta all lower.

Retailer JD Sports Fashion fell after it said annual profits more than doubled but struck a more cautious note on the outlook, while software company Micro Focus tumbled after its interim results.

Housebuilder Berkeley Group lost ground even as it posted a jump in full-year profits and said underlying reservations were slightly ahead of pre-pandemic levels.

On the upside, NatWest was the top gainer on the FTSE after an upgrade to 'buy' at Jefferies. It was also in focus after the UK government said it was extending a plan to sell more of its £11.3bn stake in the bank for another year.

Market Movers

FTSE 100 (UKX) 7,046.14 -1.48% FTSE 250 (MCX) 18,694.58 -1.34% techMARK (TASX) 4,181.17 -1.49%

FTSE 100 - Risers

NATWEST GROUP PLC ORD 100P (NWG) 225.00p 1.67% Intertek Group (ITRK) 4,239.00p 0.78% Avast (AVST) 508.60p 0.24% Sainsbury (J) (SBRY) 205.30p 0.10% Barclays (BARC) 160.26p -0.10% Lloyds Banking Group (LLOY) 43.40p -0.10% Rentokil Initial (RTO) 444.50p -0.11% GSK (GSK) 1,688.80p -0.17% Meggitt (MGGT) 770.20p -0.21% Unilever (ULVR) 3,596.00p -0.21%

FTSE 100 - Fallers

Melrose Industries (MRO) 147.60p -5.54% Shell (SHEL) 2,069.00p -3.81% Glencore (GLEN) 466.05p -3.43% BT Group (BT.A) 180.10p -3.35% Harbour Energy (HBR) 344.90p -3.20% Rolls-Royce Holdings (RR.) 88.61p -3.16% BP (BP.) 383.25p -3.06% Prudential (PRU) 946.80p -2.99% Anglo American (AAL) 3,279.00p -2.82% International Consolidated Airlines Group SA (CDI) (IAG) 116.00p -2.80%

FTSE 250 - Risers

Biffa (BIFF) 403.40p 1.15% Henderson Smaller Companies Inv Trust (HSL) 808.00p 0.87% International Public Partnerships Ltd. (INPP) 165.80p 0.73% ICG Enterprise Trust (ICGT) 1,000.00p 0.50% Dr. Martens (DOCS) 248.00p 0.32% Greencoat UK Wind (UKW) 153.00p 0.26% HarbourVest Global Private Equity Limited A Shs (HVPE) 2,055.00p 0.24% Brewin Dolphin Holdings (BRW) 510.00p 0.20% Capricorn Energy (CNE) 214.80p 0.19% BMO Commercial Property Trust Limited (BCPT) 115.00p 0.17%

FTSE 250 - Fallers

Micro Focus International (MCRO) 329.10p -7.94% Royal Mail (RMG) 264.40p -5.94% Baltic Classifieds Group (BCG) 143.00p -4.67% Allianz Technology Trust (ATT) 203.00p -4.25% SSP Group (SSPG) 226.30p -3.91% Vesuvius (VSVS) 322.20p -3.76% Chrysalis Investments Limited NPV (CHRY) 105.80p -3.64% Softcat (SCT) 1,268.00p -3.57% Tullow Oil (TLW) 48.70p -3.56% Johnson Matthey (JMAT) 1,973.50p -3.54%