Inflation bump sends chill through London’s FTSE 100

London’s top indexes slumped today as investors fretted over the damage further inflation surges could deal the UK economy.

The capital’s premier FTSE 100 index slid 0.88 per cent to 7,089.22 points, while the domestically-focused, mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.31 per cent to finish below the 19,000 mark.

Fresh data published today by the Office for National Statistics revealed inflation edged higher over the last month to a new 40-year high of 9.1 per cent, up from nine per cent in April.

Although the reading was in line with expectations, the risk of soaring prices tipping the UK into a recession by prompting consumers to cut spending or the Bank of England to race ahead with more rate hikes drove investors to ditch shares.

Yields on UK government debt shot up on the news, indicating traders are selling risky assets and flowing into safer ones such as bonds. Prices and yields move in opposite directions.

The pound initially tumbled against the dollar, but recovered to buy $1.2271.

Companies that had led a bounce back on the FTSE 100 at the start of the week notched some of the biggest losses today.

Miners Glencore and Anglo American, both of which traded near the top of the FTSE 100’s biggest riser table yesterday, fell more than 4.9 per cent apiece.

FTSE 250-listed Software firm Micro Focus plunged over 16 per cent after it downgraded its first half growth numbers.