London markets edge higher as investors shrug off another hot inflation print

London markets were muted yesterday as investors digested the implications of another red hot UK inflation print.

The capital’s premier FTSE 100 index edged down 0.07 per cent to 7,603.78 points, while the domestically-focused FTSE 250 index, which is more aligned with the health of the UK economy, dipped 0.11 per cent to 21,828.94 points.

Fresh figures published by the Office for National Statistics yesterday revealed inflation firmed even further, hitting 5.5 per cent in January, the highest rate since March 1992.

However, investors were not jolted by the print, despite the new data strengthening the likelihood of the Bank of England going further and faster in its tightening cycle.

Higher interest rates and reduced bond buying tends to hit equity markets as it reduces the present day value of companies’ future cash flows and curbs the amount of money available to deploy in stock markets.

Supermarkets were among the biggest fallers on the FTSE 100 during early trading on concerns consumers will have to slash spending as inflation erodes their living standards, but eventually recovered some losses.

Britain’s biggest supermarket Tesco closed 1.49 per cent lower.

Meanwhile, miners were among the best performers, partly due to investors pouring into the sector on expectations higher inflation will boost commodity prices.

Polymetal International was the best performer on the FTSE 100, climbing 5.05 per cent. Fresnillo and Anglo American added 3.67 per cent and 1.88 per cent respectively.

The pound gained ground on the greenback, strengthening 0.39 per cent to buy $1.3586.