Stocks in London closed firmly in the red on Friday following the highest US inflation reading since 1981, fuelling fresh fears over central bank tightening and consumer confidence.
The FTSE 100 index closed down 158.69 points, or 2.1%, at 7,317.52. The FTSE 250 ended down 400.08 points, or 2.0%, at 19,673.32, and the AIM All-Share closed down 14.30 points, or 1.5%, at 950.92.
The Cboe UK 100 ended down 2.2% at 729.20, the Cboe UK 250 closed down 2.3% at 17,397.85, and the Cboe Small Companies ended down 1.4% at 14,558.43.
In European equities on Friday, the CAC 40 in Paris ended down 2.7%, while the DAX 40 in Frankfurt ended down 3.1%.
Stocks sold off as data showed US inflation reached a new four-decade high in May, heaping more pressure on families to pay for essentials such as food, fuel and housing.
On an annual basis, the US consumer price index rose by 8.6% in May, accelerating from April's 8.3% growth. The latest reading was the highest since 1981 and beat the market forecast, cited by FXStreet, for an 8.3% increase.
Versus the previous month, the consumer prices increased 1.0% in May, picking up pace from a 0.3% increase in April and above the consensus estimate of 0.7%.
Annually, the US core inflation rate, which strips out food and energy prices, slowed for a second month in succession to 6.0% in May following a 6.2% reading in April. The print beat the market forecast of 5.9%.
The hotter-than-expected inflation print is likely to hurry the Federal Reserve along on its path of aggressive monetary policy tightening, ahead of the US central bank's interest rate decision next week. Last month, the Fed enacted its first over 50-basis-point hike since May 2000.
Central banks around the world have been acting aggressively to tame rampant inflation, with the European Central Bank on Thursday signalling that a half-point interest rate hike is on the cards for its September meeting.
The latest US inflation data compounded central bank tightening fears sparked by the ECB, leading to Friday's sell-off in Europe.
‘The surprise increase in headline inflation in the US together with the increasingly widespread acceleration of inflation components within core CPI mean that the Fed will likely keep on aggressively hiking rates in H2 2022. This in turn will make a recession in the US almost unavoidable,’ commented Liberum.
The pound took a pummelling as the dollar strengthened on the back of the inflation report. Sterling was quoted at $1.2321 at the London equities close Friday, down compared to $1.2536 at the close on Thursday.
The euro also fell, standing at $1.0518 at the European equities close Friday against $1.0657 at the same time on Thursday.
The Japanese yen was relatively steady - a small comfort at the end of a rough week for the unit - due to its safe haven status. Against the yen, the dollar was trading at JP¥134.13 compared to JP¥134.16 late Thursday.
Stocks in New York were deep in the red at the London equities close, with the DJIA down 2.5%, the S&P 500 index down 2.9%, and the Nasdaq Composite down 3.6%.
In London, Anglo American was leading the fallers in the FTSE 100, closing down 7.5%.
Brent oil was quoted at $120.90 a barrel at the London equities close Friday, down from $123.37 late Thursday. Oil majors Shell and BP both ended the session 2.4% lower.
In other commodities, gold was quoted at USD 1,862.37 an ounce at the London equities close Friday, up against $1,842.36 at the close on Thursday.
Aveva finished at the top of the FTSE 100, up 2.4%, to finish a strong week for the industrial software firm, which has risen 9.9%.
In the FTSE 250, Apax Global rallied 12% after saying the Apax X Fund has sold its controlling stake in MyCase Inc to AffiniPay.
Apax Global Alpha is a limited partner in the X Fund; it allows investors access to a portfolio of private equity funds advised by London-based Apax Partners. X Fund acquired MyCase, which provides legal practice management software and integrated payments to legal professionals, in 2020.
Apax Global Alpha said that the sale values its current look-through investment in MyCase at around €22.5 million. This represents an increase of approximately 48% compared to the last unaffected valuation and an uplift of around €7.3 million in the adjusted net asset value of Apax Global Alpha at March 31, it added.
CMC Markets recovered 11% after Thursday's 21% drop.
Elsewhere, shares in Just Eat Takeaway.com advanced 6.1% after Bloomberg reported the firm's Grubhub unit has received bid interest from private equity firm Apollo Global Management.
Citing people familiar with the matter, Bloomberg said the New York-based private equity company has displayed preliminary interest in buying the US food delivery provider.
However, Just Eat Takeaway may struggle to sell the unit for a price close to the $7.3 billion it paid in June of last year. Bloomberg reported some suitors are only considering offers around $1 billion.
ProCook plummeted 40% after the kitchenware retailer said trading has been hurt by increasingly challenging market conditions, with customers affected by ‘exceptional pressures’ on discretionary spending.
For the fourth quarter, ended April 3, ProCook said it was trading against ‘exceptionally strong comparatives’ from the prior year, when it benefited from pent-up demand following the lifting of Covid-19 restrictions and the reopening of retail stores.
The retailer said like-for-like sales have weakened across all channels, in line with the wider kitchenware market, though revenue remains ‘significantly higher’ than the comparative pre-Covid period in 2019.
Monday's UK corporate calendar has full-year results from Sirius Real Estate and Molten Ventures.
The economic calendar for Monday has UK GDP at 0700 BST. This will be in focus ahead of Thursday's Bank of England interest rate decision.
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