London Shares Fall over Growth Jitters

On Tuesday, UK shares declined because rising inflation resulted in worries over the interest rate increase to be expected, with meetings of central banks scheduled in this week and the next. Meanwhile, there was a fall in JD Sports after the CMA found that the retailer had conspired for fixing the price of certain products illegally. There was a 0.1% fall in the FTSE 100 index, while a 0.3% decline was recorded in the midcap index. On Monday, the UK Prime Minster Boris Johnson was able to pull through the vote of no confidence.

However, his authority has suffered a major blow because of a major rebellion over the ‘partygate’ scandal by his Conservative Party. Economists said that Johnson does not have authority anymore, which means that there will be a political drift in the UK. Uncertainty in the markets is not a good thing, but that seems inevitable, given what is happening in the country. The biggest concern for the markets is that the crisis of rising cost of living will become secondary to the premier’s efforts to stay in power. This means that fears about economic growth are likely to increase and this will be felt by the markets.

There was a massive surge in inflation in Britain that saw consumer spending reduce by its biggest margin last month since the COVID-19 lockdown that had been imposed in the country in early 2021. Now, investors have turned their eyes towards Purchasing Managers’ Index of S&P Global/CIPs for the previous month, as that may provide some clues about business activity. Other areas of focus include the meetings of the central banks that are scheduled for this week and the next, as this will provide insight into the interest rate decisions. The European Central Bank (ECB) is scheduled for a policy meeting this Thursday.

Meanwhile, the US Federal Reserve and the Bank of England (BoE) have their policy meetings scheduled in the next week. Even though there are worries about an economic slowdown, markets have priced in an aggressive stance from the Bank of England when it comes to monetary policy tightening. It is expected that the BoE will hike up interest rates by approximately 140 basis points by the end of the year. There was a 21.9% drop in the shares of Ted Baker, after the fashion chain disclosed that there would not be a takeover offer from its preferred bidder.

There was a 1.7% drop in JD Sports Fashion after the antitrust authority in the UK found that the sportswear retailer had conspired with Elite Sports fix the retail process of certain products of clothing of the Rangers Football Club. The biggest decliners of the FTSE 100 index were retailers, as they were down by 1.1%, while stronger crude prices saw gas and oil stocks climb up by 0.1%. It is highly likely that despite winning the no-confidence vote, Boris Johnson may eventually be replaced, as something similar had happened with Theresa May, his predecessor.

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