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FTSE 100 ends lower as pound jumps after inflation rises further in June

FTSE 100 ends lower as pound jumps after inflation rises further in June 41

By Shashank Nayar

(Reuters) – London’s FTSE 100 ended lower on Wednesday as a stronger pound weighed on multinationals that earn most of their profits overseas, while a surge in inflation coupled with rising coronavirus cases raised worries of a slower economic reopening.

The blue-chip FTSE 100 index ended 0.5% lower, with real estate stocks falling the most. Heavyweights Unilever, GlaxoSmithKline and Diageo – whose overseas earnings are eroded by a stronger pound – were also among the top drags as sterling rose after inflation jumped to its highest in almost three years.

The domestically focussed mid-cap index fell 0.8%, with travel stocks down 1.2% over concerns on the effects of a jump in COVID-19 cases.

British inflation rose for the second straight month in June to 2.5%, above the central bank’s inflation target, led by higher prices for food, fuel, second-hand cars, clothing, and footwear, official data showed on Wednesday.

“While market narratives have swung from hyperinflation and running the economy hot to a growth scare within just a month, the right position to take is somewhere in between,” said Oliver Brennan, a strategist at TS Lombard.

British house price inflation gathered more speed in May when prices rose by 10% from the same month in 2020, accelerating from April’s 9.6% annual gain, official data showed.

Shares of homebuilders were up 1.2%, the highest among other sectors.

The blue-chip FTSE 100 has gained nearly 10% so far this year, supported by cheap interest rates, but its pace of growth has slowed since June to trade range-bound near the 7,100 level as higher COVID-19 cases and inflation weighed on investor mood.

Among stocks, AstraZeneca lost 1% and was the second biggest drag on the FTSE 100. Britain’s competition regulator cleared its $39 billion buyout of U.S.-based Alexion.

Barratt Developments gained 2% after it forecast 2021 profit to be marginally above the top end of market expectations.

Snack food firm SSP Group tumbled 4.3% on its chief executive officer’s plans to step down from his role at the end of 2021 to join a private equity-backed business.

 

(Reporting by Shashank Nayar in Bengaluru; Editing by Subhranshu Sahu, Uttaresh.V and Alex Richardson)

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