UK stocks slipped on Friday and were on course for their fourth weekly decline in five, as worries about aggressive central bank actions causing a sharp economic downturn kept investor sentiment subdued globally.
The blue-chip FTSE 100 slipped 0.1% and the domestically focussed midcap FTSE 250 declined 0.3%, starting the second half of 2022 on a downbeat note after a rough first half amid worries that rapid rate hikes to tame high inflation would trigger a global recession.
“Inflation will remain the major driving factor for markets in the second half, and the overall market sentiment will hugely depend on inflation numbers,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
“The only thing that could help inflation fears ease is lower energy and commodity prices.”
The Bank of England (BoE) has raised interest rates five times since December and its next scheduled announcement is on Aug. 4, with some market players expecting a bigger hike of 50 basis points (bps).
Inflation hit a 40-year high of 9.1% in May, the fastest pace among the Group of Seven wealthy nations. The Times reported late on Thursday that Britain had proposed a cut in value-added tax, or VAT, to help households with the cost of living.
On Friday, healthcare and industrial metal and mining stocks were the biggest drags on the FTSE 100.
Shell rose 1.1% after falling in early trade on news that the oil major had suspended plans to sell its onshore oil assets in Nigeria, and after Russia moved to create a new firm to take charge of the Sakhalin-2 oil and gas project.
Shell, together with two Japanese trading companies, holds just under a 50% stake in Sakhalin Energy Investment Co.
Jupiter Fund Management and Abrdn slid 2.6% and 1.8%, respectively, after Citigroup downgraded the fund managers’ stocks to “sell” from “neutral”.
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