FTSE 100 carves out gains after inflation-induced selloff

The FTSE 100 clawed its way into positive territory on Thursday after a sharp selloff yesterday on concerns about interest rates.

London’s leading index gained 0.25% as bargain hunters stepped in to some of yesterday’s heaviest-hit stocks.

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However, the gains were less than convincing, and the cloud of rising inflation in the UK and the US hung over equity markets that have hoped for rate cuts in early 2024.

Rate cuts are looking less likely after UK inflation rose yesterday sending bond yields soaring as market positioning for lower borrowing costs unwound. 

We have previously cautioned that the rally at the end of last year was vulnerable to disappointment about rate cuts, and the selling may not yet be over if fears grow major central banks will put off cutting rates until later in 2024.

“The FTSE 100 stabilised after falling on yesterday’s nasty inflation surprise and weak Chinese growth figures,” said AJ Bell investment director Russ Mould.

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“When you add in a tight jobs market, strong US retail sales and hawkish central bank commentary it’s no surprise markets are becoming less confident about the narrative of near-term rate cuts.

FTSE 100 movers

Gambling firm Flutter Entertainment was the FTSE 100’s standout performer following news strength in its US business, which helped lift group revenues by 24% in 2023FY.

“Excitement about the company’s imminent US stock market listing and commentary around continued momentum in the business allowed investors to look past a hit from customer-friendly sporting results in the US at Flutter Entertainment,” Russ Mould said.

“The hope will be the company, whose strategy is heavily oriented to capitalising on an emerging opportunity in the US, can attract a higher valuation off the back of its US listing. The legalisation of sports betting across much of the US has created a huge new market which many UK bookmakers are looking to tap into, to varying degrees of success.”

Flutter shares jumped 12%, while peer Entain rose 4% in sympathy.

B&M European Value was the biggest faller as it traded ex-dividend. The retailer will pay a 20p special dividend to holders of the stock on the close yesterday.

JD Sports was another notable loser as it continued its decline since warning on profits early in January.

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