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The FTSE 100 index falls below 7,000 again. What’s going on?

Scene depicting the City of London, home of the FTSE 100
Image source: Getty Images.

This was a poor day for the stock markets. The FTSE 100 index closed at 6,997 after 10 consecutive trading sessions above the 7,000 mark. It was a reminder of the weakness seen recently following the Evergrande fiasco. The extent of decline from the last trading session is glaring too. At 1.1% it is the sharpest decline seen since August 19. 

Significantly, the FTSE 250 index fell even more, by 1.4% to 22,413. On average, the FTSE 100 index has tended to see higher declines than the FTSE 250, which is a more UK-focused index. However, today’s trading is clearly indicative of the fact that investors are nervous about the UK’s prospects. 

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Inflation spooks investors

This is explained by fears of rising inflation. Gas prices have reached dizzying levels, which could hamper economic activity and from there impact companies’ performance. Russian Prime Minister Vladimir Putin said that supplies to Europe can be increased. The damage to the stock markets was already done, although there was some improvement in trading over the latter half of the trading session. 

Tesco and HSBC were the biggest FTSE 100 gainers

Not all stocks were affected, though. Supermarket stock Tesco made massive gains of almost 6% after it raised its full-year guidance, buoyed by sales and profits in the first half of the year. HSBC was a surprise gainer, up by 3.4%. This was quite likely because of investment bank UBS’s upgraded guidance on the stock. It was earlier neutral on the stock but has now put a buy rating on it. The stock rallied above the 400p mark, a level not seen since mid-August. 

Recruiters among the big FTSE 250 winners

Among FTSE 250 stocks, the recruitment consultancy PageGroup was the standout stock after it raised its profit outlook in its third-quarter trading update. The stock rallied almost 8%. Possibly as a spillover effect, the recruiter Hays Group was another big gainer in today’s trading, rising by 3.4%. 

FTSE 100 losers dominated by cyclical stocks

There were plenty of losers today too, of course. Among FTSE 100 stocks, the Chilean copper miner Antofagasta saw a huge decline of 5.5%. This is in line with its ongoing decline. In the past two months alone, the stock has lost almost 16% of its value. This is a trend among industrial mining stocks, as the outlook for commodity prices is beginning to rationalise. 

Other big FTSE 100 losers were also cyclical stocks, which tend to be quite reactive to stock market fluctuations. These include non-essential retailers like Next and JD Sports Fashion as well as hospitality stock Whitbread, all of which saw an over 4% decline. Tobacco biggie Imperial Brands also underwhelmed investors with its trading update. While there was little to be disappointed in it, the update offered little encouragement as well, especially in regard to growth in the tobacco alternatives’ market. 

Among FTSE 250 stocks, the global review platform Trustpilot was the biggest loser after it reported mounting losses, losing 8% of its value today.

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Manika Premsingh owns shares of JD Sports Fashion and Imperial Brands. The Motley Fool UK owns shares of and has recommended Next. The Motley Fool UK has recommended HSBC Holdings, Imperial Brands, and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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