The FTSE 100 slipped on Thursday as attention started to shift from inflation and interest rates to global growth.
Cyclical sectors were hit on Thursday as recent data from China and concerns about growth rates in Europe and the US drove home the fragile state of the global economy.
Optimism around falling inflation rates and a possible slow down in rate hikes showed the first signs of fading as the FTSE 100 fell below 7,800 and retreated from the verge of record highs.
“US Recession fears are resurfacing as Federal Reserve policymakers flagged that more rate rises are ahead, even though inflation is coming down from dizzying heights and slowing activity is taking a toll on big companies. U.S. manufacturing output dropped in December and retail sales are now on the slide, falling at the sharpest rate in a year,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
Equities have gained steadily in 2023 and Thursday’s decline is the first significant bout of selling this year.
Cyclical retreat
As one would expect, cyclical companies experienced the heaviest selling on Thursday. Miners were the biggest drag on the FTSE 100 with Antofagasta, Glencore, and Fresnillo among the top fallers.
There was also profit taking in some of 2023’s top performers. Ocado was down 3% while JD Sports and IAG both slipped. IAG is the FTSE 100’s top riser in 2023, adding 22% in the early stages of the new year.
Following the announcement of 6% revenue growth in the year ended December 2022, Melrose dipped 1.5% as investors booked profits after a strong start to the year for shares.