The FTSE 100 was down 0.4% to 7,562.3 in midday trading on Thursday as all eyes turned to the European Central Bank (ECB) and their decision to end an unprecedented asset purchase programme.
Analysts pointed to the pressure of tackling soaring inflation amid the impact of the conflict in Ukraine as reasons for negativity in markets.
In addition, the ECB suggested they were to follow today’s move with a series of interest rate hikes just as global economies started to show signs of weakness.
“The ECB has been behind the curve in responding to inflation and may find it hard to be too aggressive with rate hikes given a more fragile economy,” said Russ Mould of AJ Bell.
British American Tobacco shares were down 1.1% to 3,524p as the company announced that cost inflation linked to the Ukraine conflict was impacting its supply chain, however it stated confidence in its FY 2022 guidance of 2% to 4% revenue growth.
The tobacco giant reported an estimated FY tobacco industry volume at minus 3% as a result of geopolitical volatility, and rumblings that the government is set to argue for an increase in the minimum legal age to purchase tobacco further served to put a dampener on consumer optimism.
“In the same way a lapsed smoker might light up a cigarette to calm their nerves, volatile trading has seen investors reach for the likes of British American Tobacco (BAT) despite all the associated ethical concerns,” said Mould.
“However, in a reminder of the regulatory pressure on the industry, a UK Government report looks set to be released today which will argue for an increase in the minimum age at which you can buy tobacco products. Even potentially raising it every year so the current generation of children can never buy cigarettes.”
“BAT knows this is the direction of travel and is investing heavily in areas like e-cigarettes and vaping to try and ensure its business isn’t eventually regulated out of existence, particularly in the West.”
Consumer stocks looked downtrodden in anticipated of higher rate hikes from the ECB, with rising food prices dealing a blow to supermarkets across the index.
Sainsbury’s shares plummeted 6.3% to 208.3p, Ocado dropped 3.2% to 921.3p, B&M fell 2.5% to 364.7p and Tesco slid 2.5% to 253p, representing the latest in a spiral for the industry as food inflation hit 4.3% in May after its 3.5% climb in April this year and consumers pared back spending on unessential food products.
Meanwhile, DIY giant Kingfisher dropped 2.8% to 248.6p as consumers threw home improvement on the back burner and tightened their belts for leaner times ahead.
“Big ticket items … were always going to be the first place where people think twice about handing over the cash. If you’re under financial pressure, the idea of paying more than £1,000 for something is a big commitment,” said Mould.