The FTSE 100 (^FTSE) slipped on Wednesday as investors digested the latest inflation numbers from the Office for National Statistics (ONS) and the biggest squeeze on the cost of living since the 1970s.
London’s bluechip index fell 0.1% after the opening bell, while the France’s CAC (^FCHI) climbed 0.4% on the day, and the DAX (^GDAXI) rose 0.2% in Frankfurt.
It came as UK inflation soared to a more than 40-year high in April thanks in part to rising food, energy and fuel prices and the war in Ukraine as the economy deteriorates and people have less to spend.
The consumer price index (CPI) measure of inflation rose to 9%, the highest since it started being calculated in 1997, up from 7% in March. ONS estimates that CPI hasn’t been higher since 1982 when it peaked at nearly 11%.
Meanwhile, core CPI, which strips out volatile food and energy components, rose 6.2% in a sign that inflation has become embedded across Britain’s economy.
Around three quarters of the increase in the annual inflation rate this month came from utility bills, according to Grant Fitzner, chief economist at the ONS.
Sterling (GBPUSD=X) has slipped against the dollar in early trading following April’s red-hot inflation data. It dipped 0.7% to $1.240, having jumped 1.4%on Tuesday after data showed the unemployment rate had dropped to its lowest since 1984.
“Over the last six years it’s generally been one of life’s truisms that when you hear people starting to predict that the pound is on course for a move towards parity against the US dollar, its usually time to start buying it,” said Michael Hewson, chief market analyst at CMC Markets.
“While there is always a risk of a move lower, while we’re above key support at 1.2000 it would be unwise in the extreme in thinking in terms of such move, and yet we still get the same absurd parity calls whenever the 1.2000 level comes into view.”
Read more: UK inflation hits 40-year high of 9% as the cost of living squeeze intensifies
Across the pond, US benchmarks posted strong gains on Tuesday as traders were cheered by brisk US retail sales data and shares in tech, banking, airline and other sectors rose.
Wall Street’s S&P 500 (^GSPC) advanced 80.84 points, or 2%, to 4088.85. The tech-heavy Nasdaq (^IXIC) soared 2.8%. The Dow Jones (^DJI) added 1.3% on close.
Stocks, briefly pared gains, but climbed back toward new session highs following remarks from Federal Reserve chair Jerome Powell who voiced resolve in fighting inflation. “There could be some pain involved” in restoring price stability,” Powell said on Tuesday.
“Slow start for European equities this morning, with the major bourses struggling to build much on yesterday’s gains,” said Neil Wilson, chief market analyst at Markets.com. “Wall Street enjoyed a strong bounce on Tuesday, with the S&P 500 up 2% and the Nasdaq over 2.75% higher for the day.”
Asian stocks were mixed overnight following a strong start in some markets, which took the lead from a rally on Wall Street.
The Nikkei (^N225) rose 1% in Tokyo, while the Hang Seng (^HSI) was flat in Hong Kong and the Shanghai Composite (000001.SS) lost 0.3%.
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