Investing
FTSE 100 slides on economy worries, weak IAG results
Global Banking & Finance Review®
Company
By Sruthi Shankar
(Reuters) -UK’s top share index fell on Friday, with British Airways owner leading losses after disappointing results, while a recession warning from the Bank of England weighed on sentiment.
International Consolidated Airlines Group tumbled 6.6% to a near one-month low after it reported a bigger-than-expected quarterly operating loss and scaled back plans to ramp up short-haul capacity at Heathrow airport.
The FTSE 100, which comprises global companies including miners and energy giants, dropped 0.6% to 7,456.4, with most subsectors in the red.
The British central bank warned on Thursday that the country risks a double-whammy of a recession and inflation above 10% as it raised interest rates to their highest since 2009.
The FTSE 100, while on track for weekly losses, has outperformed on a year-to-date basis as a surge in oil and metal prices as well as weakness in sterling has boosted commodity giants and exporters on the index.
“The FTSE 100 is exposed to all the sectors that are causing inflation concerns, and that benefits the UK equity market,” said Caroline Simmons, UK chief investment officer at UBS Global Wealth Management, who expects the index to hit 8,100 by December.
“It hurts the economy because of the consumer squeeze but it benefits the FTSE 100. Now, of course, sterling has weakened and that’s also helpful.”
Sterling dropped below 1.23 against the dollar for the first time in nearly two years on concerns about the economic outlook as well as local elections. [GBP/]
The gloom in markets knocked the domestically oriented midcap FTSE 250 index 1.2% lower, putting it on track for its biggest weekly decline in two months.
Among the bright spots, insurer Beazley Plc gained 6.6% after it reported a surge in quarterly gross written premiums.
Insurers Hiscox, Admiral Group and Direct Line also rose between 2.1% and 3.8%.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Vinay Dwivedi)
The FTSE 100 is a stock market index that represents the 100 largest companies listed on the London Stock Exchange, reflecting the performance of the UK equity market.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured annually.
Interest rates are the amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal amount.
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in GDP, income, employment, and trade.
The Bank of England is the central bank of the UK, responsible for issuing currency, managing monetary policy, and maintaining financial stability.
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