UK stocks started the day deep in the red following the release of UK inflation data which raised the prospect of additional rate hikes by the Bank of England.
London’s leading index recovered some of the losses throughout the session and was trading down just 0.2% at 7,893 at the time of writing. The index had touched lows of 7,871 earlier in the session.
The more UK-focused FTSE 250 was down 0.6%. Most other major European equity indices were in positive territory.
The decline in UK stocks was sparked by worries about the next move by the Bank of England’s voting committee which will now have to factor in UK inflation at 10.1% – higher than economist’s estimates.
“The Bank of England remains under pressure to keep a lid on inflation, so we can’t rule out another rate rise in May,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.
Markets quickly priced in additional rate hikes to interest rate futures.
FTSE 100 risers
British American Tobacco was the FTSE 100’s top riser on Wednesday after the tobacco company said they expected organic revenue growth of 3-5% in the year ahead. It also noted sharp growth in their non-combustibles business which now accounts for around 15% of revenue.
British American Tobacco shares were 3.5% higher at the time of writing. Imperial Tobacco jumped on BATS’ coattails and rose 2%.
FTSE 100 fallers
Fresnillo fell 2% as the possibility of higher interest rates sapped interest for precious metals. The silver miner fell as gold retreated 0.2% and silver reversed sharp losses to trade 0.1% higher.
Higher inflation driven by soaring food prices is a source of concern for the UK’s shoppers who will likely steer away from Ocado’s premium online shopping services. Ocado shares were down 2% on Wednesday as investors steered away from their equity.
Oil prices were down around 2% on Wednesday making BP and Shell less attractive – BP was down 2% while Shell slipped 0.8%.