Sector movers: US inflation data, rate hike talk trigger dollar strength and falls in miners and financial stocks

Thu 12 May 2022

LONDON (SHARECAST) - (Sharecast News) - Drops in commodity stocks dragged the FTSE 350 lower and saw the top-flight index underperform as another wave of risk aversion swept over financial markets triggered by a mixed reading on producer prices Stateside.
Investors' underlying concern was that inflationary pressures could be set to last for longer globally.

According to the US Department of Labor, the annual rate of increase in so-called final demand prices fell back from the upwardly-revised 11.5% pace observed in March to 11.0% for April (consensus: 10.7%).

Final demand prices had initially been reported as up by 11.2% in March.

At the core level however, price gains slowed from an also upwardly-revised rate of 9.5% for March to 8.8% in April (consensus: 8.9%).

Against that backdrop, BoE Deputy Governor, Dave Ramsden, told Bloomberg TV that Bank Rate might need to be hiked by more than expected.

Two more top European Central Bank officials, those from periphery Ireland and Slovenia, signalled their support for a first interest rate hike in July alongside.

The US dollar jumped higher in response, especially against the single currency which was down by 1.15% to 1.0392 as of the London close.

In parallel, dollar strength dragged June gold futures on COMEX down by 0.98% to $1,835.60/oz. and July copper by 2.54% to $4.102 per pound.

Brent crude oil on the other hand was slightly in the green, trading up by 0.34% to $107.88 per barrel on the ICE, amid talk of further possible European Union sanctions on energy imports from the Russian Federation.

Risk aversion was perhaps most salient in the cryptocurrency space with Bitcoin futures plummeting by 9.56% to $28,240.89.

Talk of higher official short-term interest rates also took their toll on the longer-end of the interest rate curve in the UK.

Ten-year Gilt yields slumped by 16 basis points to 1.667%, in the process taking their toll on the shares of both banks and life insurers.

Going the other way, retailers were finding a residual bid following an updraft during the previous session.

Top performing sectors so far today

Retailers 3,005.93 +1.15%

Real Estate Investment & Services 2,483.11 +1.04%

Medical Equipment and Services 8,263.77 +0.72%

Household Goods & Home Construction 12,471.42 +0.65%

Food Producers 6,120.58 +0.55%

Bottom performing sectors so far today

Precious Metals and Mining 10,172.69 -6.94%

Industrial Metals & Mining 6,917.32 -3.96%

Oil, Gas and Coal 7,588.85 -3.37%

Life Insurance 6,182.80 -2.24%

Banks 3,020.72 -1.75%
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