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Stagflation fears trigger sea of red in the City as FTSE 100 plummets


The capital’s premier index plummeted over two per cent to 7,199.25 points, while the mid-cap domestically-focused FTSE 250 index, which is more aligned with the health of the UK economy, fell 1.58 per cent to 19,336.43 points (Photo by Hollie Adams/Getty Images)

Intensifying concerns that the UK economy is hurtling toward a period of stagflation sent London’s FTSE 100 tumbling this morning.

The capital’s premier index plummeted over two per cent to 7,199.25 points, while the mid-cap domestically-focused FTSE 250 index, which is more aligned with the health of the UK economy, fell 1.58 per cent to 19,336.43 points.

Weaker than expected GDP figures published by the Office for National Statistics (ONS) this morning strengthened bets on the UK hurtling toward a protracted period of weak growth and most likely a recession.

The economy shrank 0.1 per cent in March on a monthly basis, weaker than the unchanged print expected by the City.

The poor figures prompted investors to ditch stocks and flow into safer assets such as UK government bonds.

Yields on 10-year gilts edged down 0.09 percentage points. Prices move inversely to yields.

The pound tanked against the dollar, weakening 0.4 per cent to buy $1.2203.

The ONS also downgraded their February monthly growth figure to minus 0.1 per cent from a positive reading before.

Over the last three months, output jumped 0.8 per cent, again, lower than the one per cent expected by analysts.

Worryingly, the figures are already trending in the wrong direction before April’s tax hikes took effect and inflation surged even higher, raising the prospect of output heading even further downward over the coming year.

Stagflation occurs when growth is anaemic while prices are rising sharply. It is often triggered by consumers reining in spending in response to income trailing inflation, leading to a reduction in living standards.

Swelling costs make it less profitable for firms to produce goods and services, while weaker demand reduces profits, choking growth and clouding companies future performance.

FTSE 100-listed industrials suffered the heaviest losses. 

Miners Glencore, Antofagasta and Anglo American all fell more than four per cent.

Oil giants BP and Shell lost more than two per cent.



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