FTSE 100 plunges as inflation worries spark fresh concerns over interest rates

19 October 2023 , 13:01

924     0

The FTSE 100 has taken a bit of a hit. (Image: PA Archive/PA Images)

London's FTSE 100 has taken a hit after disappointing inflation figures showed no change in price rises last month, causing fresh uncertainty about the future of interest rates. The UK's top index lost nearly 100 points, with housebuilders suffering the most significant losses.

The index closed down by 87.21 points, or 1.14%, at 7,588. Barratt Developments, Taylor Wimpey and Berkeley Group were among the biggest losers of the day, as investors worried about the impact of ongoing inflation on mortgage rates and the housing market.

Despite predictions that the Consumer Prices Index (CPI) inflation would decrease, it remained steady at 6.7% last month. The Office for National Statistics reported that fuel prices were the main contributor to the headline rate, with costs for petrol and diesel rising for drivers.

However, core inflation saw a slight decrease, and data from Tuesday showed that wage growth slowed in August. Russ Mould, investment director at AJ Bell, commented: "Higher-than-expected UK inflation data has put the market in a spin, sending shares in housebuilders, airlines, banks and utilities into a downward trend."

"Sticky inflation strengthens the argument for further interest rate hikes, which in turn adds to pressures for consumers and businesses."

Shop prices 'are yet to peak and will remain high' as inflation hits new heights

"Banks would normally benefit from higher interest rates but the market seems to be worried that further hikes could increase bad debts."

Other European stocks took a hit on Wednesday, with Germany's Dax and France's Cac 40 both closing lower.

Over in the US, stocks were also down, with the S&P 500 and Dow Jones both falling by the time European markets closed.

The price of Brent crude oil saw a surge, with a barrel costing 90.94 US dollars, up 1.16%.

The pound was down against the US dollar but up against the euro.

In company news, Whitbread, the owner of Premier Inn, saw its share price rise after it revealed plans for more openings due to a rise in independent hotel closures.

The company reported a 14% rise in accommodation sales in the UK in the first half of the year, and a 10% increase in food and beverage sales.

However, Barratt's share price fell after the company warned that the property market will continue to be affected by higher mortgage costs. The company also revealed that its weekly reservations had fallen in recent months. Shares in Barratt fell by 5.1%.

The top performers on the FTSE 100 were Centrica, Reckitt, Whitbread, CocaCola HBC, and BT. On the flip side, AstraZeneca, Barratt Developments, Taylor Wimpey, Rolls-Royce Holdings, and Howden Joinery Group saw the biggest drops.

* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]

8 money changes coming in February including Universal Credit and passport fees

Steve Charnock