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The FTSE 100’s poor run continued into a fresh week as a slump in UK GDP, rampant inflation and worries over virus curbs in China press further on sentiment.
As a result, commodities and retail stocks were broadly in the red at the end of the session.
London’s top flight ended the day down 111.71 points, or 1.53%, at 7,205.81, to strike its lowest closing price since March.
Michael Hewson, chief market analyst at CMC Markets UK, said: “It’s been another day of surging yields and risk-averse stock markets today, as the hangover from Friday’s hot US CPI number carried over into a new trading week, with the FTSE 100 sliding back towards its lows last month, with the Dax not too far behind it.
“Asia markets carried over from where US markets left off last week with sentiment also struggling on reports out of China, that authorities are looking to reimpose Covid restrictions in Shanghai and Beijing, as infection rates rise again.
“The biggest fallers have been in basic resources, as well as consumer discretionary and retail, where there is the biggest concern over high valuations and weak earnings.”
The German Dax decreased by 2.47% by the end of the session, while the French Cac fell 2.62%.
In the US, the main markets opened sharply lower as Friday’s hefty inflation reading maintained its impact and a plunge in the cryptocurrency market dragged stocks linked to the sector to big losses.
Meanwhile, sterling lifted higher in the afternoon session following an early drop due to a 0.3% fall in GDP for April, according to the latest Office for National Statistics’ (ONS) figures.
The pound was up 0.22% against the dollar at 1.215 and increased 0.16% against the euro to 1.165.
In company news, bus and train operation Go-Ahead Group leapt in value after it told shareholders it received two takeover approaches which it would “be minded to” accept if a firm bid is made.
It received one unsolicited approach from Australian firm Kelsian, and was also contacted by a consortium consisting of fellow Australian bus operator Kinetic and transport infrastructure company Globalvia over a possible deal.
Shares in the company closed 150p higher at 1,360p.
Other transport firms, such as National Express, also made gains as a result of takeover interest in the sector.
Elsewhere, housebuilder Countryside finished lower despite putting itself up for sale weeks after rejecting a takeover bid.
Countryside Partnerships told shareholders on Monday it has hired advisers from Rothschild & Co to oversee the potential sale process, after its decision to rebuff a £1.5 billion approach by a US investor resulted in shareholders calls for a sale.
Shares moved 5.6p lower to 280.2p.
The price of oil slipped on the back of improvement in the value of the dollar and further demand concerns in China.
Brent crude decreased by 1.12% to 120.64 US dollars per barrel when the London markets closed.
The biggest risers in the FTSE 100 were Fresnillo, up 41.6p at 790p, United Utilities, up 13p at 1,059p, HSBC, up 3.8p at 502.9p, BT, up 1.35p at 179.5p, and Severn Trent, up 16p at 2,900p.
The biggest fallers of the day were IHG, down 371p at 4,310p, Scottish Mortgage Investment Trust, down 50p at 695.8p, Whitbread, down 151p at 2,526p, Entain, down 67.5p at 1,341p, and Glencore, down 24.2p at 481.3p.