Yahoo Finance FTSE loses steam as energy costs push UK inflation to 30-year high
European stocks were mixed as markets price in the latest economic snapshots of Britain and the US, and as the war in Ukraine drove up energy costs, pushing inflation in both countries to decades highs.
The FTSE 100 (^FTSE) inched up 0.1% as UK inflation hit a 30-year high of 7% in the year to March, up from 6.2% in February. France’s CAC (^FCHI) rose 0.1% and the DAX (^GDAXI) lost 0.3% in Frankfurt.
March's reading marks the sixth consecutive month that the print outstripped forecasts, worsening a cost of living crisis threatening to derail the nation’s economic recovery, and putting pressure on chancellor Rishi Sunak to help struggling households.
The scale of the crisis will become more clear in April, when a 54% rise in the energy price cap kicks in. The Bank of England, which is on course to hike rates for the fourth time in May, expects inflation to peak above 8% this month.
"The only way is up for inflation, with the UK snapshot for March coming in at 7% and in the US the CPI reading hitting a 41 year high at 8.5%," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. "The steepest rises in a generation have unsettled financial markets, as investors digest the unsavoury prospect of tougher hikes in interest rates."
Read more: UK inflation hits 30-year high of 7% as cost of living crisis deepens
Oil prices pushed back above $100 a barrel, regaining lost ground after losses in recent days. Lockdowns in Shanghai and planned releases from strategic reserves in the US and elsewhere have pressured crude downward recently.
Brent crude (BZ=F) rose 1.9% to $106.57 a barrel. US light crude (CL=F) was 1.5% higher to $102.16 in electronic trading on the New York Mercantile Exchange at the time of writing.
Britain's central bank is not the only one under pressure to keep a lid on inflation. Across the pond, US benchmarks notched slight gains as investors gauge the Federal Reserve’s plans to raise hikes by 50bps next month to tame 40-year high inflation.
The tech-heavy Nasdaq (^IXIC) led the way, adding 1.5%. Wall Street’s S&P 500 (^GSPC) advanced 28.60 points, or 0.7%, to 4426.05, and the bluechip Dow Jones (^DJI) rose 0.5% at London's close.
The US producer-price index, another gauge of inflation, jumped by the most on record last month, highlighting the inflationary pressures that could feed through to consumers. Prices paid to US producer increased 11.2% in March from the year before and 1.4% from the previous month, the Labor Department said on Wednesday.
Meanwhile, inflation soared to levels unseen since Ronald Reagan became president in 1981. The print rose 8.5% over the year to the end of March as the Ukraine war drove up gas prices. The consumer price index (CPI), which measures the prices of a basket of goods and services, increased 0.3% last month, below consensus of 0.5%. But softer than expected core inflation, which stood at 6.5% after stripping out volatile food and energy costs, provided some relief.
The data, which showed some tentative signs of easing inflation pressures, pushed government bond yield slower. The yield on the benchmark 10-year US Treasury note fell to 2.66% after hitting 2.77% on Monday.
Read more: Brent crude swings back above $100 on tight supply concerns
Asian equities were mostly higher overnight with the Nikkei (^N225) rising 1.9% in Japan, while the Hang Seng (^HSI) edged 0.3% higher in Hong Kong, the Shanghai Composite (000001.SS) closed 0.4% lower.
Watch: How does inflation affect interest rates?
