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FTSE 100 Drops to Two-Month Low on Inflation Concerns

(Reuters) -London’s FTSE 100 fell to a two-month low on Monday, dragged by heavyweight miners and financial stocks, while concerns about rising inflation also weighed on the index ahead of a rate decision by the Bank of England (BoE) this week.

The blue-chip FTSE 100 index dropped 1.4%. Miners Glencore and Rio Tinto and financial stocks Prudential and HSBC Holdings led the declines.

Britain’s Prudential Plc fell 6.2% to be the top loser on the FTSE 100 after saying on Saturday it plans to raise HK$22.5 billion ($2.9 billion) through a concurrent public offer and international share placing on the Hong Kong Stock Exchange.

Investors now await the BoE’s policy meeting this week for a timeline on its plan to ease its massive pandemic stimulus against the backdrop of rising inflation pressures from supply chain disruptions and higher energy prices.

“It is quite clear there is a growing sense of unease about the economic outlook as a growing number of companies look ahead to the prospect of rising costs, and the possible effects on their profit margins, at a time when central banks are coming under pressure to pull back on the generosity of their current stimulus measures,” said Michael Hewson, chief market analyst at CMC Markets UK.

The FTSE 100 is still on track to record gains for this year, but the pace of those gains have recently slowed after it fell for three straight weeks over concerns of rising costs and evidence of slowing economic growth.

Energy stocks were also among top losers, with shares of heavyweights Royal Dutch Shell and BP falling 1.5% and 0.9% respectively.

Britain is considering offering state-backed loans to energy firms after wholesale gas prices soared, prompting big suppliers to ask for support from the government to cover the cost of taking on customers from companies that have gone bust.

The domestically-focussed mid-cap index fell 1.1%, with travel stocks being among the top losers.

Reporting by Shashank Nayar in Bengaluru; editing by Uttaresh.V

Source: Reuters


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