UK midcaps at 3-week low as recession fears grow

UK MIDCAPS hit a 3-week trough on Monday (Aug 22) while the export-centric FTSE 100 eased from its recent peak on fears of aggressive interest rate hikes by major central banks and slowing economic growth.

The FTSE 250 index, home to several companies exposed to the domestic economy, slid 1.3 per cent to its lowest since Jul 28.

A cocktail of factors including hawkish signals from major central banks, surging energy prices in Europe and an 8-day protest by workers in Britain’s container port weighed on the mood.

“The port strikes would increase the cost of purchasing goods, adding to the inflation as an issue and essentially constraining supply,” said Joshua Mahony, a senior market analyst at IG Group. “It’s not good for the economy.”

Airlines, industrials, homebuilders and retailers took the biggest hit among midcaps.

Wizz Air dropped 7.7 per cent as the European budget carrier said its finance chief would step down from his post to pursue opportunities outside the company.

Britain’s slide towards a recession gathered momentum after data last week showed inflation jumping above 10 per cent, wages lagging far behind price growth and consumer confidence sinking to a record low. The Bank of England has forecast a 15-month contraction from the end of this year.

Investors also appeared to be nervous ahead of the Federal Reserve’s annual symposium in Jackson Hole, Wyoming later this week. Several Fed policymakers have recently pushed back against expectations of peaking inflation and a dovish pivot.

The blue-chip FTSE 100 dropped 0.8 per cent, trading below a 10-week high hit last week.

Oil majors Shell and BP fell about 1 per cent each as crude prices declined on worries about the weakening global economic outlook and hit to fuel demand.

Cineworld rose 8.1 per cent after slumping almost 60 per cent to a record low on Friday, as the world’s second-largest cinema chain operator said it was considering options including a possible bankruptcy filing in the United States.

“It feels like it’s a steady slope at the moment for Cineworld,” said Mahony, adding that it was not a surprise given the company’s high debt load. REUTERS