The FTSE 100 fell on Thursday with higher oil prices raising the question of whether we had seen the back of increasing inflation rates.
Brent oil was trading comfortably above $95 on Thursday and the FTSE 100 broke beneath 7,600 to trade at 7,568.
Oil prices have steadily marched higher since Saudi Arabia announced another production cut and Russia banned exports of high-quality fuels.
“Another leg up in oil prices has added to the market worries about sticky inflation, thereby stoking fears that interest rates will stay higher for longer. Brent Crude moved higher to settle around the $95 per barrel mark and WTI was close behind after new data showed a further decline in US stockpiles,” said Russ Mould, investment director at AJ Bell.
“The market is worried that supplies of oil are going to be tight and if prices keep going, it is going to cause a real headache for businesses and consumers.”
Adding to the downward pressure on the FTSE 100, a number of constituents traded ex-dividend on Thursday and these companies dominated the top fallers.
Pheonix Group lost 6% of its value after paying a bumper 26p dividend worth around 5% in shareholder return. Barratt Developments also paid a sizeable dividend leading to a near 6% drop in shares.
Ocado couldn’t find a bid on Thursday and the food distribution and technology company traded at the lowest levels since July. Hopes of a bid from Amazon seem to fading.
Miners were among the top risers as traders stepped in to pick up the beaten-down sector on Thursday.
Rising bond yields
US bond yields rose again reflecting concerns about higher interest rates for a longer period, especially in the US.
This fear has also been evident in US stocks which looked set for another weaker session on Thursday.