Inflation shock: biggest share moves after FTSE 100 slumps 2%

The rebound of stocks including Persimmon (LSE:PSN) and Land Securities (LSE:LAND) was today brought to an abrupt halt as markets worldwide received a reality check on interest rate cuts.

In a global sell-off that accelerated following the UK’s hot 4% inflation print, the FTSE 100 index reached mid-afternoon down 150 points, or 2% at its lowest level since November. It’s now down over 4% in 2024 so far.

The S&P 500 index stood 0.8% lower today, having declined in yesterday’s session after Federal Reserve governor Christopher Waller pushed back against Wall Street's expectations for rapid rate cuts in 2024.

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His comments pushed the 10-year Treasury yield back above 4% before Asia markets saw a bout of heavy selling as China missed estimates with a fourth-quarter GDP reading of 5.2%.

The Hang Seng index in Hong Kong slumped 3.7% as a result, reflecting ongoing worries about high levels of property debt and sluggish consumer demand. It’s down more than 10% this year.

Prudential (LSE:PRU), which is now focused on the high-growth and high potential markets of Asia and Africa, fell to its lowest level in over a year after a decline of 26p to 779.2p. It was a similar story for regional lender Standard Chartered (LSE:STAN), which lost 16.2p to 573p.

Other stocks on the blue-chip fallers board reflected the realisation among City traders that the Bank of England is now much less likely to cut interest rates in the spring.

A day after returning to the FTSE 100 index, Persimmon shed 67.5p to 1,401p as the wider housebuilding sector gave up a slice of the 30% upside seen since October.

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Barratt Developments (LSE:BDEV) retreated 18.2p to 519.4p and Taylor Wimpey (LSE:TW.) lost 3.8p to 140.8p, having previously benefited from an improved demand outlook as mortgage rates fell on hopes of a pivot in Bank of England policy.

Some in financial markets are pricing a rate cut in May, which ING economist James Smith believes still looks premature.

He warns that this will require tangible progress on tackling services inflation and wage growth as well as a relatively muted fiscal package from the Chancellor at the March budget.

Smith said: “For now, we’re pencilling in an August cut with 100 basis points of easing to follow this year, though we’ll keep that under review as the data and fiscal news comes in over the next couple of months.”

Interest rates staying high for longer delivered a fresh blow to the appeal of property as an investment class, meaning a setback for Land Securities in the FTSE 100 index.

Shares in the Bluewater and Piccadilly Lights owner rebounded 100p to 720p in the month before Christmas but are now back at 641.6p after today’s post-inflation fall of 26.8p.

Other stocks under pressure included student accommodation firm UNITE Group (LSE:UTG) with a fall of 41.5p to 985.5p, while retail warehouse space owner Segro (LSE:SGRO) dipped 28.2p to 826p.

The lack of a respite from rising debt costs pushed a number of utilities up the FTSE 100 fallers board, with Severn Trent (LSE:SVT) down 100p to 2,513p and National Grid (LSE:NG.) off 35.5p at 1,031p.

Shell (LSE:SHEL) was among other stocks under pressure, down 64p to 2,371.5p after the renewed global economic uncertainty caused the price of Brent crude to fall 1.5% towards $77 a barrel.

The poor session for Shell also reflected the caution of UBS analysts after they lowered their price target from 3,000p to 2,600p. They noted the oil giant is now trading at a premium to its peers, having benefited from the increased financial discipline of new CEO Wael Sawan.

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UBS said: “The scale of the business means any changes made now will take many years to have an impact. In the interim, we see increasing risks related to a cut to consensus estimates, a slowdown of the share buyback and a gradual rebalancing of the LNG markets.”

Glencore (LSE:GLEN) shares also fell 23.85p to 415.3p after Deutsche Bank removed its “buy” recommendation due to several near-term earnings and strategy headwinds.

These include the prospect of cuts in production guidance as a result of asset sales, mine closures and operational headwinds. The bank also warned that shareholder returns in 2024 may be limited to just the base dividend.

A shortened risers board was led by fluid and motion control engineering firm IMI (LSE:IMI) after Goldman Sachs raised its price target to 2,020p and Smith & Nephew (LSE:SN.) after Bank of America improved its “buy” recommendation on the medical devices firm to 1,320p.