Stagflation fears bite back to weigh on London markets

Growing concerns over soaring prices triggering a period of stalling global economic growth dragged on London’s top indexes today.

The capital’s premier FTSE 100 index dipped 0.08 per cent to 7,593 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dipped 0.43 per cent to 20,310.99 points.

Global market sentiment has been knocked by a string of the world’s top economic institutions sounding the alarm on the health of the world economy.

The World Bank said earlier this week stagflation – when prices rise while growth stalls – could drag on the global economy for several years, clouding the outlook for equities. 

City traders are “sensitive to the forecast from the World Bank that the pain of stagflation is going to persist for several years, even if a global recession is averted,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.

The Organisation for Economic Co-operation and Economic Development also said yesterday the UK economy will stall next year amid a tight cost of living squeeze.

The pound continued its poor performance of recent weeks, losing around 0.4 per cent against the dollar to buy $1.254.

A weaker pound is stoking fears inflation in the UK could persist and be much higher compared to other rich countries.

Industrials and financials were among the worst performing sectors on the FTSE 100, with miner Antofagasta leading losses in the former and money manager Schroders shedding the most in the latter.