Sharpening inflation concerns weigh on FTSE 100 retailers

Sharpening concerns over high inflation triggering a slowdown in consumer spending weighed on London markets today.

The capital’s premier FTSE 100 index dropped 0.61 per cent to 7,488.11 points, while the mid-cap domestically-focused FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.99 per cent to 19,306.89 points.

Retailers dragged the City’s top indexes lower, signalling investors are worried households are set to slash consumption in response to inflation squeezing their finances, weighing on high street stores’ bottom lines.

Middle-class favourite and online supermarket Ocado led losses on the FTSE 100, shedding over five per cent.

Trainer retailer JD Sports was among the biggest fallers, dropping nearly three per cent. FTSE 250-listed cult book maker Dr Martens dropped 4.59 per cent.

Forecasters at US investment bank Citi said earlier this week inflation will climb to 18.6 per cent in the UK in January, led higher by the energy watchdog hiking the cap on bills to pass on higher wholesale gas prices.

The Bank of England has said the UK will tip into a 15-month long recession in the final months of this year.

Investors are also fretting over whether US Federal Reserve chief Jerome Powell will roll back growing market expectations for a slowdown in the pace of rate hikes at his speech on Friday at the annual central banking symposium at Jackson Hole.

The pound surged around 0.7 per cent against the dollar to buy $1.1849.

Sterling has tumbled against the greenback in recent months due to investors pouring into US assets to take advantage of higher interest rates.

A string of weak US economic data published today rolled back investors’ appetite for dollar assets on fears the world’s biggest economy may be headed for a recession.

“A bigger than expected contraction on services PMI in July was followed by a big minus 12.6 per cent slide in new home sales, which in turn prompted some US dollar weakness and a rebound in tech stocks,” Michael Hewson, chief market analyst at CMC Markets UK, said.