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FTSE 100 falls again as election and inflation caution creeps in

The FTSE 100 was down again on Wednesday as nerves around the election and inflation started to creep into equities, and the FTSE’s record-breaking run became a distant memory.

Just a few weeks ago, the FTSE 100 was breaking to fresh record highs on a near daily basis, but the reintroduction of interest rate concerns and the upcoming general election have dampened much of the enthusiasm.

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The FTSE 100 was down 0.5% to 8,203 and levels not seen since the start of March.

Weakness was largely confined to the UK on Wednesday after the NASDAQ hit another record high overnight helped by surging AI-focused stocks.

“Financial markets are fracturing in terms of sentiment, with AI exuberance continuing to power mighty tech while worries about high interest rates lingering keep investors cautious elsewhere,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The FTSE 100 has opened on the back foot, as stubborn inflation remains in focus and the General Election campaign continues to throw up economic and corporate uncertainty.”

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At the time of writing on Wednesday, few gainers were present, with most industry sectors in the red. BP and Shell were slightly higher amid rising oil prices, but their gains were not enough to offset weakness elsewhere. Only 16 of the FTSE 100’s constituents were trading higher.

“The weakness for the UK’s flagship equity index came despite higher oil prices lifting BP and Shell amid speculation OPEC will maintain supply cuts at its meeting on 2 June. Consumer goods companies, miners and financials acted as a drag on the UK market,” said AJ Bell investment analyst Dan Coatsworth.

Ocado, down 5%, was the top faller, as it retraced some of yesterday’s surprise gains.

Many investors will be watching tomorrow’s US PCE data and gaining insight into the trajectory of inflation as a potential catalyst for stocks.

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