Stagflation fears trigger sea of red in the City as FTSE 100 plummets

Stronger signals indicating the UK economy is in the teeth of a slump sent London’s FTSE 100 tumbling today.

The capital’s premier index plummeted 1.56 per cent to 7,233.34 points, while the mid-cap domestically-focused FTSE 250 index, which is more aligned with the health of the UK economy, closed 0.85 per cent at 19,480.88 points.

Weaker than expected GDP figures published by the Office for National Statistics today strengthened bets on the UK hurtling toward a protracted period of weak growth and most likely a recession.

The economy shrank 0.1 per cent in March on a monthly basis, weaker than the unchanged print expected by the City.

The poor figures prompted investors to ditch risky assets such as stocks.

The pound initially tanked against the dollar, weakening 0.4 per cent to buy $1.2203.

The ONS also downgraded their February monthly growth figure to unchanged from a positive reading before.

Over the last three months, output jumped 0.8 per cent, again, lower than the one per cent expected by analysts.

Stagflation – when growth is anaemic while prices are rising sharply – jitters resurfaced after the figures were released. 

Stagflation often entails consumers reining in spending in response to income trailing inflation and businesses slashing production due to swelling costs making it less profitable to produce goods and services, both downside risks for stocks.

FTSE 100-listed industrials suffered the heaviest losses. 

Oil giant BP was the third biggest faller on the index, dropping 4.7 per cent.