FTSE 100 falls 2% as US stocks tumble 4%

The FTSE 100 was down 2.2% to 7,268.4 in midday trading on Thursday, as 40-year high inflation of 9% and the rising cost of living continued to erode investor confidence across the UK.

However, the market was sheltered from the worst of the dramatic fall across the Atlantic, as the NASDAQ fell 4.7% to 11,418.1 and the S&P 500 dropped 4% 3,923.6 after retailer Target’s shares lost 25% on rising costs and supply chain problems, and wiped almost $25 billion off its market cap.

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“Against this backdrop the FTSE 100’s fall this morning looked pretty modest, the combination of commodity producers, stocks on lower valuations and generous dividends helping it to outperform other global markets,” said AJ Bell investment director Russ Mould.

The FTSE 100 was anchored by generous dividends, lower valuations and positive commodities performance, pulling the market up from the worst of the sell-off storm.

Royal Mail shares tumbled 12.8%, as the company plummeted on an 8.8% drop in annual pre-profit to £662 million, and warned investors of a “downside risk” to expectations for the coming year.

The beleaguered firm has been facing internal pressure as well, with nationwide strikes threatened as executive measures to shake up the company backfired.

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“Royal Mail had been making real progress with its turnaround plans … now inflationary pressures are threatening to unpick that progress and have reignited troubles with its work force as talks continue to avert a potential nationwide strike,” said Mould.

“Pay increases can’t hope to keep pace with rising prices and demands for more flexibility from staff, including working Sundays, are unsurprisingly going down like a lead balloon.”

The group unveiled a full-year dividend of 20p per share, however, bringing its shareholder payment to twice its 10p dividend year-on-year.

Scottish Mortgage Investment Trust shares fell 5% to 739.4p following a NAV total return over the 12 months to 31 March of negative 13%, falling dramatically below the FTSE All-World index benchmark, which gained 13%.

“Investors in Chinese companies have suffered from President Xi’s regulatory crackdowns in the name of ‘common prosperity’. In retrospect, it has been a mistake to reduce our holdings in western online platform companies rather than their Chinese counterparts,” said a spokesperson for the firm.

However, the company announced an uptick in its total dividend to 3.5p compared to 3.4p the previous year.

National Grid shares fell 1.9%, after the utilities group announced an 82% operating profit growth to £4.3 billion, alongside the acceleration of its transition to net-zero with 70% of its five-year investment aligned with EU taxonomy principles.

“National Grid remains focused on positioning our business, through acquisitions and investment, to deliver net zero while continuing to safely ensure security of supply at the lowest possible cost to consumers. And our results today reflect the strength of this strategy,” said National Grid CEO John Pettigrew.

The company estimated broadly flat earnings over 2022-2023, and reported a dividend rise of 4% to 50.9p from 49.1p, marking a 3.7% uptick in line with executive policy.

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