London stocks drop on worries over rising inflation

Inflation hit its highest level in more than a year in April amid higher household utility bills and clothes prices, according to figures released by the ONS

London stocks were firmly in the red by midday on Wednesday on worries about rising inflation, after the release of the latest UK reading.

The FTSE 100 was down 1.1% at 6,955.92 as inflation figures sparked fears of monetary policy tightening by the Bank of England.

Figures released earlier by the Office for National Statistics (ONS) showed inflation hit its highest level in more than a year in April amid higher household utility bills and clothes prices.

The consumer price inflation rate rose to 1.5% in the 12 months to April from 0.7% in March, coming in about expectations of 1.4% and marking the highest reading since March 2020. The rate of core inflation rose to 1.3% from 1.1%.

On a monthly basis, CPI increased by 0.6% in following a 0.3% rise in March.

ONS chief economist Grant Fitzner said: Inflation rose in April, mainly due to prices rising this year compared with the falls seen at the start of the pandemic this time last year. This was seen most clearly in household utility bills and clothing prices.

As the price of crude oil continues to rise, this has fed through to the cost of motor fuels, which are now at their highest since January 2020, he said.

Russ Mould, investment director at AJ Bell, said: Inflation concerns continue to trouble investors, with the UK among the countries reporting a growing cost of living. A key focal point for the market is whether economies are running too hot and what central banks might do to cool them down.

In equity markets, miners declined as copper and iron prices dropped, with Antofagasta, BHP, Anglo American and Rio Tinto all down.

On the upside, plumbing and heating products distributor Ferguson was at the top of the FTSE 100 as it lifted its full-year guidance after better-than-expected third-quarter results.

Infrastructure group John Laing rallied after saying it had agreed to a £2bn takeover by US buyout firm KKR.

Media group Future advanced as it said annual results would be well ahead of market expectations after profit more than doubled in the first half.

Dunelm gained after the homeware retailer said annual pre-tax profit was set to be "significantly" ahead of analysts’ expectations, as it hailed a strong performance in the five weeks since reopening.

Industrial thread manufacturer Coats Group also gained after saying its full-year performance would be "slightly ahead" of its previous expectations as it reported a return to organic revenue growth.

Mr Kipling and Bisto owner Premier Foods moved up as it reinstated its dividend after 13 years and hailed an "outstanding" year, underpinned by more at-home food consumption during the pandemic.

Drinks company C&C Group also rose after an upgrade to ‘buy’ at Berenberg.