The FTSE 100 closed down 0.4% to 7,014 in Friday trading, as the market continued to lose ground after a week of central bank action.
UK interest rates were hiked to 1.25%, which the market had been pricing in for weeks, however the Bank’s revised inflation estimate of 11% in Q4 this year threw investors for a loop as stocks plummeted on the back of the nauseating report.
“The sun is shining bright, the weekend is here, yet all investors can think about is medicine to calm the motion sickness after one of the most chaotic five days for stocks and shares in a long time,” said AJ Bell investment director Russ Mould.
“Rising inflation, rising interest rates and a rising chance of a recession have all served to turn stomachs in equity-land.”
The markets have been through the wringer, with the current volatility shaking up indexes across the board in the year-to-date.
“Year-to-date that means the FTSE 100 has fallen approximately 6%, the S&P down 24%, and the Nasdaq 33% lower,” said Mould.
“This is a shock to the system for many investors who are relatively new to the game and haven’t seen a proper market correction before.”
The US markets recovered a slight amount of ground, with the S&P 500 up 0.5% to 3,686 and the NASDAQ up 1.4% to 10,796.5.
Meanwhile, European markets recovered slightly, with the German DAX closing up by 0.5% to 13,108.8, the French CAC gaining 0.1% to 5,891.9 and the Italian FTSE MIB rising 0.6% to 21,869.6.
Tesco
Tesco shares were up 0.8% to 251.7p as the supermarket struggled to fight off encroaching competition from Aldi as the cost of living continued to bite.
With inflation speeding towards 11% and food inflation set to hit 15% this summer, Tesco is rapidly finding itself backed into a corner as it struggles to withhold passing on inflationary costs to customers.
“Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible,” said Tesco CEO Ken Murphy.
UK sales fell by 1.5%, however overall group retail sales rose by 2% year-on-year.
“Overall sales figures enjoyed a positive contribution from inflation, but volumes seem to be falling as habits start to shift in the face of challenged household budgets,” said Mould.
“The cost of living crisis is largely out of Tesco’s hands and when it comes to the things it can control it is doing well.”
“The Aldi Price Match and Low Everyday Prices initiative is helping to hold off the challenge of the German discounter and by offering lower prices on lots of products exclusively to Clubcard members it is helping foster loyalty among its customer base.”
Oil Stocks Fall
The price of oil plummeted to $113 per barrel mark for Brent Crude, serving to drag down the oil giants on the market.
The US Federal Reserve’s 0.75% interest rates hike and the Bank of England’s 0.25% hike also hit prospects for the energy majors going forward, as Shell shares dropped 4.6% to 2,044p and BP shares slid 6.1% to 379.4p.
Glencore
Glencore shares fell 0.6% to 461.2p after the mining company reported its operating profits were estimated to exceed its top-range guidance at $3.2 billion for FY 2022.