The FTSE 100 and the pound both sank lower on Wednesday after traders digested the latest dramatic UK inflation figures, which stoked fears of a recession later this year.
Figures from the Office for National Statistics revealed that Consumer Price Index (CPI) inflation rocketed to 9% last month on the back of a surge in energy prices.
Retailers were once again among the losers over the fear rising prices will hit consumer spending in the coming months.
The FTSE 100 ended the day down 80.26 points, or 1.07%, at 7,438.09 points.
“The pound has dipped slightly lower as worries about a recession have reared up again after UK inflation jumped to the highest level in 40 years,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“With the spectre of stagflation looming, there are expectations that the Bank may be forced to take more of a softly-softly approach to rising interest rates further with the risks that a very aggressive policy risks tipping the UK into a deeper downturn.”
The pound decreased by 0.2% against the dollar to 1.238, but increased 0.02% against the euro to 1.181.
Elsewhere, other markets in Europe pulled back after US Federal Reserve chairman Jerome Powell said he would not hesitate to raise rates to keep inflation down.
The German Dax decreased by 1.26% by the end of the session, while the French Cac fell 1.2%.
On Wall Street, the message also hit sentiment sharply, with the Dow Jones and S&P both opening lower.
In company news, Ambrosia and Bisto manufacturer Premier Foods climbed during the session after the group’s pre-tax profits jumped 16.4% to a higher-than-expected £102.6 million in the year to April 2.
Premier said its Mr Kipling cake brand enjoyed its best year ever in 2021, helping the overall sweet treats category post a 7% rise in revenues.
Shares in the food group were 10.8p higher at 117.4p at the end of play.
Darktrace slumped heavily after a senior director of the cyber security specialist was linked to the legal row over Autonomy’s sale to Hewlett Packard.
The Telegraph reported that Nicole Eagen, chief strategy officer at the firm, was investigated by the US Department of Justice for her role in the sale, according to a judgment from Mr Justice Hildyard.
The reports shook investors and pushed shares 57.8p lower to 323.2p at the close.
Pub group Marston’s slipped back after it said its brewing joint venture with Carlsberg is no longer expected to post a profit after being hit hard by rising commodity and electricity costs.
Shares in the hospitality group finished 4.5p lower at 58p.
The price of oil fell as reports in Beijing highlighting rising infection rates took the steam out of a recent rise driven by hopes of improving demand in China.
Brent crude decreased by 1.76% to 109.96 US dollars per barrel when the London markets closed.
The biggest risers on the FTSE 100 were Rolls-Royce, up 3.57p at 84.78p, British Land, up 15.8p at 522.4p, SSE, up 39.5p at 1,920p, Aviva, up 8.35p at 414p, and Land Securities, up 11.4p at 754p.
The biggest fallers of the day were Ocado, down 72.4p at 727.8p, Experian, down 150p at 2,519p, JD Sports, down 7.15p at 124.7p, B&M, down 25.1p at 440.7p, ad Croda International, down 326 at 6,524p.