United Kingdom

Inflation fears wipe £57bn off FTSE stocks 

Billions of pounds were wiped off the value of Britain's leading companies yesterday as the spectre of inflation sent global stock markets tumbling.

On a brutal day for investors, the FTSE 100 index fell 2.5 per cent, or 175.69 points, to 6947.99 while the FTSE 250 was down 2.3 per cent, or 530.05 points, to 22,167.14.

It was the worst day for the Footsie since February. In total, some £57billion was wiped off the value of FTSE 100 and 250 companies.

Inflation fears: On a brutal day for investors, the FTSE 100 index fell 2.5 per cent or 175.69 points to 6947.99 while the FTSE 250 was down 2.3 per cent or 530.05 points to 22,167.14

Wall Street and markets in Europe and Asia also fell, with tech stocks such as Tesla and Apple among those hardest-hit.

Investors fear inflation will start to rise as the global economic recovery is turbocharged by unprecedented levels of government spending.

The return of inflation could force central banks to raise interest rates and slow, stop or reverse money-printing programmes that have propelled stock markets to recent highs. 

This could put the brakes on the economy and hit appetite for certain stocks.

Hargreaves Lansdown analyst Nick Hyett said: 'Higher inflation implies higher interest rates, and higher interest rates are particularly toxic for companies that promise little in the way of profits today, but rapid growth in years to come. 

That's a pretty accurate description of many tech stocks, and the US market is increasingly dominated by US tech.

'Despite the jitters investors shouldn't be abandoning the tech sector. A temporary boost in inflation was inevitable. 

What matters is whether inflationary pressure is sustained – there's no convincing evidence that's the case yet.'

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