London: Stronger pound weighs on FTSE 100

[LONDON] London's FTSE 100 fell on Thursday, coming under pressure from a stronger pound, while fashion retailer Boohoo slumped to a 14-month low after it warned that higher inflation would hurt margins.

The internationally focused FTSE 100 index ended down 0.1 per cent after having gained as much as 0.7 per cent earlier in the session as the US dollar earners in the index took a hit from sterling's strong gains.

Retailer Boohoo dropped 15.1 per cent after it warned that freight inflation in its supply chain and higher wages for workers would impact full-year profit margins.

"This is not Boohoo's best look. It is spending heavily on increasing capacity and if sales don't grow to match it, it will have serious implications for profits," said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

The FTSE 100 has gained nearly 10 per cent so far this year, helped by optimism over economic recovery, robust corporate earnings and dovish central bank policies.

However, a recent rise in inflation due to supply chain constraints and higher oil prices have raised interest rate hike bets, weighing on equity markets globally.

"Initially, it felt like UK's economic recovery was going well and that there was a huge amount of (monetary) control built in, but it now feels like prices are getting out of hand,"said Danni Hewson, an analyst at AJ Bell.

Limiting further losses on the FTSE 100 were industrial miners, up 2.0 per cent tracking a jump in iron ore prices, driven by hopes of a recovery in Chinese demand.

The domestically focused mid-cap index shed 0.1 per cent, with travel and leisure stocks leading declines, and recorded its worst monthly performance since March 2020.

Meanwhile, data showed the UK's gross domestic product grew more strongly than previously thought in the second quarter.

AstraZeneca shares climbed 1.4 per cent after its Covid-19 vaccine showed 74 per cent efficacy at preventing symptomatic disease in a US trial.

Whiskey maker Diageo rose 1.3 per cent after it forecast a boost to operating margins on the back of higher spending on premium brands and at restaurants and bars.

REUTERS