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FTSE 100 lags peers and pound falls ahead of UK GDP figures

The FTSE 100 was in the red and the pound fell ahead of UK GDP numbers. Photo: Matt Cardy/Getty
The FTSE 100 was in the red and the pound fell ahead of UK GDP numbers. Photo: Matt Cardy/Getty (Matt Cardy via Getty Images)

European shares failed to take momentum from a global stocks rally on Thursday after new figures showed inflation steadying in the world’s largest economy.

In London, the FTSE 100 (^FTSE) lost 0.6% at close, the CAC (^FCHI) made up some lost ground, up 0.1% in Paris and in Frankfurt the DAX (^GDAXI) dipped 0.1%.

The pound (GBPEUR=X) fell as much as 0.5% against the euro to €1.182 ahead of UK GDP numbers, which are expected to show further signs of a weakening British economy.

Sterling (GBPUSD=X) lost less than 0.1% to $1.221 against the dollar after surging 1.5% to $1.225, the highest level since the start of August on Wednesday.

It comes as consumer prices in the US increased 8.5% in the 12 months to July, a slower rise than in the month before and below economists’ forecasts of 8.7%. Core prices remained steady at 5.9%.

The numbers published on Wednesday also showed that on a month-on-month basis, there was no increase in inflation last month compared with the 1.3% monthly rise in June.

Read more: UK house prices on the rise despite fall in new buyer inquiries

Also weighing on the bluechip index were several big names trading without the rights to their latest dividends, including Shell (SHEL.L), Barclays (BARC.L), Rio Tinto (RIO.L) and AstraZeneca (AZN.L).

British multinational pharmaceutical giant GlaxoSmithKline (GSK.L) sank to the bottom of the top index, down as much as 12% — its biggest drop since 1998 — amid worries about litigation over the heartburn drug Zantac.

"A swathe of ex-dividends on the FTSE 100 has meant that the index has been left behind as Wall Street moves higher once again," said Chris Beauchamp, chief market analyst at online trading platform IG.

"But this temporary weakness in London might prove beneficial for some dip buyers, and with the macro outlook brightening for the time being the FTSE 100’s global stocks should continue to provide attractions for investors."

Across the pond, Wall Street indices continued a rally from the previous session, opening in the green on Thursday as investors bet the Federal Reserve will temper aggressive interest rates rises.

The Nasdaq composite (^IXIC) was up 0.2% in early trade after entering a new bear market on Wednesday.

The benchmark S&P 500 (^GSPC) added 19.89 points, or 0.5%, to 4230.13, while the Dow Jones (^DJI) advanced 0.6% at London's close.

Read more: Russian oil production to fall by a fifth after EU import ban, IEA says

Steve Clayton, fund manager at HL Select, said: "Wall Street raced higher yesterday evening after new inflation data showed a slower than expected pace of price increases. Investors took this as a sign that the scale of US interest rate rises could be less than first feared and bid stocks higher.

"Investors might have been cheered, but the Federal Reserve was keen to pour cold water over the markets’ ardour, with officials stressing that rates were going to keep on rising until the Fed was confident that inflation was heading back to its 2% target."

Asian stock markets made strong gains overnight as relief from Wednesday's softer US inflation print buoys global markets, but finished mixed.

Japan's Nikkei (^N225) lost 0.7%, while the Hang Seng (^HSI) edged 2% higher in Hong Kong and the Shanghai Composite (000001.SS) gained 1.6% in China.

Watch: How does inflation affect interest rates?