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Worsening economic outlook and inflation woes pull FTSE lower again

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London’s top flight ended the day down 116.56 points (Jonathan Brady/PA) (PA Wire)
London’s top flight ended the day down 116.56 points (Jonathan Brady/PA) (PA Wire)

The FTSE 100 slumped again on Thursday as investors swallowed the prospect of rampant inflation and an increasingly gloomy economic outlook.

London stocks dropped immediately after the International Monetary Fund said the energy price shock caused by the invasion of Ukraine had worsened the risk of recession.

London’s top flight ended the day down 116.56 points, or 1.63%, at 7,039.81.

“We’ve seen further weakness in commodity prices as markets start to price in a double whammy of slowing growth and higher interest rates,” commented Michael Hewson, chief market analyst at CMC markets UK.

“This is being felt in basic resources and energy as both copper and oil prices slide sharply, dragging the FTSE 100 back towards last week’s lows, led by the likes of Anglo American, Rio Tinto and Glencore.”

Sentiment was also notably weak across the Channel, with traders worried about higher inflation predictions and reduction in GDP growth.

Mr Hewson added: “European markets have slipped back sharply on a combination of rising political risk in the euro area as the Italian government teeters on the brink of collapse, and the EU Commission cut its GDP forecasts for 2022, to 2.6%.”

The German Dax decreased by 1.86% by the end of the session while the French Cac fell by 1.41%.

In the US, the main markets opened lower after updates by JP Morgan Chase and Morgan Stanley both pointed towards stress in the economy.

Meanwhile, sterling made a slight rebound against the dollar after the US currency had lifted to a 20-year high.

The pound was up 0.34% against the dollar at 1.182 and was 0.02% higher against the euro at 1.179 at the close.

Car insurers were among the day’s big losers after Sabre warned over a hit from soaring costs as rampant inflation takes its toll on the sector.

Sabre dropped by 75p to 113.6p and pulled down sector rivals such as Admiral and Direct Line as a result.

Elsewhere in company news, Playtech shares plunged after a Hong Kong-based financier walked away from a potential multibillion-pound deal to buy the gambling technology business.

Finance company TTB said it is no longer interested in making a bid, months after first approaching management.

As a result, the Isle of Man-headquartered business saw shares slide by 94p to 422p.

Experian shares made gains after it revealed that growth in the Americas helped the company withstand a slowdown in the UK as economic conditions became more precarious.

Shares in the credit check specialist moved 91p higher on Thursday to 2,661p after it told investors that revenues grew “in line” with expectations over the three months to June.

The price of oil slid to its lowest level since February as traders continue to fear wider inflation will constrain energy demand.

Brent crude decreased by 2.33% to 97.25 US dollars per barrel when the London markets closed.

The biggest risers of the day were Experian, up 91p at 2,661p, Avast, up 12.6p at 518p, Entain, up 21p at 1,103.5p, Centrica, up 1.22p at 85.58p, and Scottish Mortgage Investment Trust, up 10.8p at 779p.

The biggest fallers of the session were Admiral, down 427.5p at 1,933.5p, Fresnillo, down 40.6p at 644p, Standard Chartered, down 33p at 544p, Ocado, down 43p at 770p, and Anglo American, down 137.5p at 2,547.5p.

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