The FTSE 100 closed down 0.4% to 7,276 in on Wednesday as UK inflation hit a fresh record of 9.4%, dampening investor appetite for consumer-focused stocks and stoking recession fears. A warning from the EU that Russian gas could also be cut off also rattled markets.
Food and fuel were the largest contributors to inflation, with food inflation rising to 9.8% from 8.7% in May and petrol prices hitting a record price climb of 42.3% year-on-year.
“Another larger-than-expected increase in inflation is turning up the heat on the UK’s economy – and on the spending power of the nation,” said AJ Bell head of personal finance Laura Suter.
“It’s the same story as previous months: petrol, home energy bills, food prices and mortgage costs are all pushing up the inflation rate as they keep on heading upwards.”
Consumer stocks sank, with Associated British Foods sliding 0.4% despite a 6% growth in Q1 sales and a 4.2% rise in branded sales.
However, the foodstuffs group reported a climb in value meal sales as the cost of living crisis drove consumers to less costly products.
“We’ve made a strong start to this financial year, growing sales by 6% in the quarter and again increasing market share both instore and online, as we continue to apply the elements of our branded growth model,” said Premier Foods CEO Alex Whitehouse.
British American Tobacco shares fell 0.9% to 3,496p, Diageo dropped 0.2% to 3,665.7p, Reckitt Benckiser slid 0.9% to 6,364p, Unilever dipped 0.6% to 3,917.7p and Tesco declined 0.5% to 260.8p.
EU tells Europe to limit gas usage
The EU asked European countries to cut gas usage by 15% in response to potential threats from Vladimir Putin to not restart gas exports via the Nord Stream 1 pipeline on its scheduled reopening on Thursday.
EU Commission president Ursula Von Der Leyen asked European states to reduce gas demand between August and March.
The EU said the target was voluntary, however it could become mandatory if countries refuse to opt in and abide by the restrictions.
Von Der Leyen commented that Putin was using gas exports to Europe as a “weapon” against Europe as the war in Ukraine wages on.
