FTSE 100 climbs as London markets shake off inflation fears

London’s FTSE 100 jumped during opening exchanges today driven by investors in the capital shaking off inflation concerns that rattled global markets yesterday.

The capital’s premier index added 0.74 per cent to reach 7,079.97 points in the first hour of trading today.

Global markets sold off yesterday as investors rejigged their portfolios in preparation for a higher inflationary and tighter monetary policy backdrop.

On Wall Street, the tech-heavy Nasdaq plunged 2.83 per cent, while the S&P 500 suffered its worst day since May. 

Stronger inflation tends to leave segments of stock markets vulnerable to lower real returns due to higher costs eating in margins. Elevated bond yields also makes stocks less attractive, prompting investors to sell equities and buy fixed-income assets.

Central bankers delivered the strongest signals yet that the wave of monetary stimulus in response to the Covid-19 crisis could soon be reined in last week. The US Federal Reserve and the Bank of England said further progress in their respective economies has strengthened the case for monetary tightening.

Russ Mould, investment director at AJ Bell, said: “If investing is often about climbing a wall of worry, then market participants arguably face the equivalent of the Matterhorn right now but on Wednesday investors seemed to be undaunted.”

“Against this uncertain backdrop central banks are having to weigh up inflation risks which, like chewing gum on the sole of a shoe, are proving stickier than they’d hoped.

“To counter the threat posed by rising prices they face the prospect of dialling down economic support at a time of mounting uncertainty over the recovery.”

Retailer Next led the FTSE higher this morning after it published results showing profits were 5.9 per cent higher compared to pre-pandemic levels. Its shares rose 2.90 per cent.

Housing stocks performed well during the opening session, boosted by Bank of England data showing mortgage lending recovered in August despite the looming end of the watered down stamp duty holiday.

The likes of housebuilder Barratt Developments and property search site Rightmove up more than 1.60 per cent.

The mid-cap FTSE 250 gained 0.73 per cent to hit 23,296.84 points, lifted by Cambridge-based cybersecurity firm Darktrace soaring 3.69 per cent.

The pound lost further ground on the greenback, down 0.13 per cent to buy $1.3517.