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FTSE 100 off to tepid start as inflation fears linger

The FTSE 100 made a tepid start on as weak Chinese export data emerged, in addition to comments from US Treasury Secretary Janet Yellen that she would not be averse to higher interest rates because it would signal the economy was on the mend.

Less than three hours into the week the UK index is up by 0.2% to 7,082.97.

Yellen’s comments contain a “hint of menace for the markets given what rising rates normally mean for the performance of equities,” says Russ Mould, investment director at AJ Bell.

“This hint of menace might become something more genuinely frightening for investors if it is followed by a high level of inflation when the US figures are published later this week.”

“Very quickly the issue of rising prices and their impact on monetary policy could become front and centre again, after being pushed to the back of the market’s mind by a US jobs report on Friday which, while not terrible, presented a fragile enough picture of employment to suggest the US Federal Reserve would maintain low rates and financial stimulus for longer.”

FTSE 100 Top Movers

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Royal Mail (2.91%), along with homebuilders Persimmon (2.46%) and Taylor Wimpey (2.43%), lead up the FTSE 100 early on Monday.

At the other end, Anglo American (-2.70%), Antofagasta (-2.01%) and Fresnillo (-1.88%), have seen the biggest falls so far today.

Reckitt Benckiser

Reckitt Benckiser (LON:RKT) will make a £2.5bn loss by selling its underperforming baby formula business in China to a private equity company called Primavera Capital Group. The FTSE 100 consumer goods company took over the business four years ago as part of its acquisition of Mead Johnson. The deal for the baby milk group came to $16.6bn.

Reckitt will now sell the majority of the Chinese division to Primavera for $2.2bn. The deal will amount to $1.3bn once costs are taken into account. Once all costs are factored in, including goodwill, Reckitt will lose £2.5bn with the sale. It will also retain an 8% stake in the business.

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