The FTSE 100 was flat on Wednesday as UK inflation came in higher than expected.
Unlike the US, where there is evidence surging prices have started to peak, inflationary pressures look pretty entrenched in the UK with further increases in energy prices still to come.
“The inflation reading will only add to conviction that the Bank of England will hike rates a further 50 basis points at the next opportunity – providing consumers with a double whammy of rising food and energy bills as well as higher mortgage costs,” says AJ Bell financial analyst Danni Hewson.
“Expectations for higher rates prompted strength in the pound. That’s typically not helpful for the FTSE as it is stuffed full of companies that do business abroad, meaning strong sterling hits the relative value of these overseas earnings.
“Banks were notable risers on an anticipated benefit from a continued increase in interest rates.
“Turnaround specialist Leo Quinn continues to make progress at Balfour Beatty, despite rising costs. A corporate ‘Mr Fix-it’, Quinn has positioned the construction services business to take advantage of a resilient infrastructure sector and turned what was a bit of a basket case into an increasingly well-oiled machine.
“Since Quinn took the helm at the start of 2015 Balfour Beatty’s shares have advanced 45%. A respectable showing given the impact of disruptive events like Brexit and the Covid pandemic.”