Britain’s FTSE 100 retreated from a three-and-a-half-year high on Tuesday, led by consumer stocks amid recession worries, after hawkish comments from two U.S. Federal Reserve officials raised worries about future rate hikes.
The blue-chip FTSE 100 declined 0.3%, while the domestically focussed FTSE 250 mid-cap index fell 0.4%. Consumer staples such as Diageo, Ocado and Unilever were among the biggest drags on the blue-chip index, after NielsenIQ warned that weak confidence around personal finances and a squeeze on disposable income would hold back growth in food retail sales.
As fears of an economic downturn loom large, investors are looking for clues on future rate hikes from Fed Chair Jerome Powell’s speech at a panel discussion in Stockholm at 1400 GMT. On Monday, Fed officials said inflation data due later this week would sway the central bank’s decision about rate hikes.
“They (Fed) will just stick to that sort of rhetoric, so they can bring that in with minimum market reaction,” said Michael Baker, head of online services at Oval Money. Britain’s labour market cooled further in December, a survey showed, hinting that the Bank of England’s (BoE) concerns about the risk of longer-term inflation may ease.
But worries remained as the BoE’s chief economist warned of persistent inflationary pressure. Surveys showed British consumer spending in December lagged inflation, representing a sizeable fall in real-term expenditure.
Retailers such as Tesco and Marks and Spencer will be in focus ahead of their earnings reports this week. Car makers such as Bentley and Rolls-Royce reported record sales for last year. Among individual stocks, recruiter Robert Walters slumped 8.1% after the company warned that its full-year profit was expected to be slightly below market expectations.
