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United Kingdom

UK shares drop the most in 7 months on inflation woes; THG shines

3 minute read

Signage is seen outside the entrance of the London Stock Exchange in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls

British stocks clocked their worst day since late October on Tuesday after a sudden drop in big U.S. tech stocks over inflation concerns, while shares of THG Plc eyed their best day on record on raising more than $1 billion in new equity.

The blue-chip index (.FTSE) slid 2.6%, dragged down by heavyweight banks (.FTNMX301010), life insurers (.FTNMX303010) and miners (.FTNMX551020).

All the FTSE 100 constituents were trading in negative territory.

The domestically focused mid-cap FTSE 250 index (.FTMC) tripped 2.3%.

Travel and leisure (.FTNMX405010) stocks slipped 4.0%, with British Airways owner IAG (ICAG.L) falling the most, after it launched an 800 million euro ($971.52 million) convertible bond due in 2028 to strengthen its balance sheet. [nL8N2MY2L0]

Globally, tech stocks took a beating as investors braced for U.S. inflation data due on Wednesday, while keeping a close eye on a host of Federal Reserve speakers this week to assess how authorities are likely to respond to receding risks posed by the coronavirus pandemic in some major economies.

"With China and the U.S., the world’s two largest economies, showing signs of rising inflationary pressures, investors are getting nervous," said Sophie Griffiths, Market Analyst, UK & EMEA, at ONANDA.

"The overriding fear is that pandemic stimulus combined with reopening economies will spark a sharp drive high in inflation, forcing central banks to take action, tightening policy and potentially slowing down economic recovery."

The FTSE 100 has gained about 7.2% year-to-date on optimism that speedy COVID-19 vaccinations and constant policy support from the government would drive a stronger economic recovery.

Beauty and lifestyle e-commerce company THG (THG.L) surged 11.7% after it raised more than $1 billion in new equity, including $730 million from Japan's Softbank Group (9984.T). [nL4N2MY1HU]

NatWest (NWG.L) slid 3.5% after the UK government completed a 1.1 billion pound ($1.55 billion) share sale at a discounted price. [nL8N2MY1LI]

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