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Inflation worries sink FTSE 100

by LLB Editor
11th May 21 10:27 am

The market just can’t shake the inflation fears which are clouding the recovery from Covid.

Some days investors appear relaxed about inflation risks and the possibility of central banks having to lift rates and withdraw stimulus. Today is not one of those days as, after last night’s big sell-off on Nasdaq, the FTSE 100 finds itself undoing much of its recent progress and trading below 7,000.

“Surging commodity prices are acting as a canary in the coal mine for inflation – with the huge infrastructure and stimulus packages in the US a key contributing factor,” says AJ Bell investment director Russ Mould.

“The valuations of the tech-based growth companies in the US are harder to justify in an inflationary and rising interest rate environment – where lower risk assets typically offer higher returns – hence the big fall in the Nasdaq yesterday.

“However, one UK technology-orientated name which is doing very nicely indeed is sports and health products online platform The Hut Group or THG for short.

“THG is raising a large amount of money, some of which is coming from Japanese investor Softbank which has also struck a deal giving it the option to invest in THG’s Ingenuity division.

“The Ingenuity platform is already used by Nestle, Nintendo and Homebase, and has been compared to Ocado’s out of the box web-based groceries solution for global supermarkets.

“Where THG is attracting inward investment, NatWest saw the Government sell £1.1 billion worth of shares to reduce its holding to 54.8%. In this case the bank will likely be pleased as it marks another step in the long rehabilitation of the group from the financial crisis.”

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