FTSE 100 shrugs off rosy inflation numbers as house builders drop

While it was still "too early" to be confident that interest rates won't cause some imbalances, "the chances of a systemic financial event are diminishing".
While it was still "too early" to be confident that interest rates won't cause some imbalances, "the chances of a systemic financial event are diminishing".

London’s FTSE 100 shrugged off upbeat figures today that indicated the UK’s inflation surge may have finally passed its peak.

The capital’s premier index edged 0.09 per cent lower to 7,495.93 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.25 per cent to 19,037.92 points.

Investors seemingly sat pat on new numbers from the Office for National Statistics that suggested inflation has finally turned a corner.

Prices climbed 10.7 per cent over the year to November, down from a rate of increase of 11.1 per cent in the previous month, a much steeper fall than the City expected.

High inflation is crushing household incomes and raising fears of a spending slowdown triggering a long recession which could squeeze corporate profits. 

The Bank of England has lifted interest rates eight times in a row in response and is likely to make it nine successive hikes today with a 50 basis point rise, adding to pressure on stocks.

“Prices are still seeing double-digit increases and, in some areas, inflationary pressures are proving worryingly sticky,” Russ Mould, investment director at broker AJ Bell, said.

House builders dragged the FTSE 100 marginally lower, likely on fears of a home price correction in the coming due to higher mortgage rates pricing people out of the market.

Taylor Wimpey and Barratt Developments each dropped more than 1.3 per cent.

The pound strengthened more than 0.5 per cent against the US dollar on bets the US Federal Reserve will slow down its rate hike cycle.