The blue-chip FTSE 100 index slid 0.3%, with travel stocks down nearly 0.7%. Retailers Unilever, GlaxoSmithKline, and Diageo were among the top drags as the pound rose after inflation jumped to its highest in almost three years.
The domestically focussed mid-cap index fell 0.4%, with Cineworld being the top loser.
British inflation rose further above the Bank of England’s target in June at 2.5%, up from 2.1% in May, led by higher prices for food, fuel, second-hand cars, clothing, and footwear, official data showed on Wednesday.
That pushed UK’s benchmark 10-year bond yields up by five basis points, but the central bank’s comments that said the spike is likely to be transitory helped curb further losses.
“We’re still stuck in an inflationary limbo, where we can’t tell if rising prices are a statistical blip, or a more concerning and permanent feature of the global economic recovery,” said Laith Khalaf, a financial analyst at AJ Bell.
The blue-chip FTSE 100 has gained nearly 10% so far this year, supported by cheap interest rates, but its pace of growth has slowed since June to trade range-bound near the 7,100 level as higher COVID-19 cases and inflation weighed on investor mood.
Among stocks, AstraZeneca lost 0.7% and was the top drag on the FTSE 100. UK’s competition regulator cleared its $39 billion buyout of U.S.-based Alexion.
Barratt Developments gained 1.3% after it forecast 2021 profit to be marginally above the top end of market expectations.
Snack food firm SSP Group tumbled 2.7% on its chief executive officer’s plans to step down from his role at the end of 2021 to join a private equity-backed business.
For a look at all of today’s economic events, check out our economic calendar.
(Reporting by Shashank Nayar in Bengaluru; Editing by Subhranshu Sahu and Uttaresh.V)