40-year high inflation hits FTSE 100 and drags down pound

City traders were today jolted by fresh figures revealing UK inflation is running at its highest level since the 1980s.

The capital’s premier FTSE 100 index closed 1.07 per cent lower at 7,438.09 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.58 per cent below the 20,000 mark.

Market sentiment was knocked by new data published by the Office for National Statistics yesterday showing prices are nine per cent higher than they were a year ago, the quickest rate of acceleration in four decades.

The jump has been largely driven by international energy prices soaring due to a combination of strong demand triggered by the pandemic unlocking rubbing up against low supply and Russia’s invasion of Ukraine.

There is growing concern that a tightening cost of living squeeze will derail the UK economy and possibly tip the country into a recession, weighing on the outlook for London stocks.

The pound plunged on the news, weakening 0.8 per cent against the dollar to buy $1.2389.

A weaker pound tends to lift the FTSE 100 due to exporting firms representing a large proportion of the index.

Middle-class favourite and online supermarket Ocado was the biggest faller, losing nearly 10 per cent, followed by credit checker Experian, losing 5.62 per cent.

FTSE 250-listed cybersecurity firm Darktrace tumbled around 15 per cent. Travel operator Tui was the second–biggest faller on the index, finishing around 13 per cent lower.