By Shashank Nayar
– London’s FTSE 100 gained on Friday, boosted by optimism about economic re-opening, although the index was set to post a weekly loss on weakness in energy and travel stocks.
The blue-chip FTSE 100 index rose 0.4%, with retailers Unilever and Diageo being the top boost. The index is set to end the week 1.1% lower, led by a 4.4% weekly drop in energy stocks and 6.6% fall in travel stocks.
The domestically-focussed mid-cap index gained 0.3%, lifted by low-cost air carriers Wizz Air and EasyJet, and tourism group TUI, as Britain was set to ease all lockdown restrictions from Monday.
Britain’s economy will expand rapidly this quarter as additional coronavirus-related restrictions are lifted and further pent-up demand is unleashed, a Reuters poll found, but growth is at risk from new variants of COVID-19.
“Inflation is a bit of a double-edged sword, which means demand is clearly strong but higher inflation also warrants a conversation of a tighter monetary policy. So, until we have confirmed commentary from the central bank on their stance, inflation will continue to be an overhang,” said David Madden, an analyst at Equiti Capital.
The FTSE 100 has gained 9.2% so far this year on support from cheap interest rates, but higher-than-expected inflation levels, a robust labour market recovery, and hawkish central bank comments have sparked worries of an overheating economy and weighed on the index.
Among stocks, Burberry dropped 4.3% even after it said it had made an “excellent start” to its new year, with full-price sales accelerating and strong growth in leather goods and outerwear.
Miner Rio Tinto fell 1.4% after it reported a 12% fall in quarterly iron ore shipments after storms affected its West Australian operations, but is expected to report bumper results this month on soaring prices for the steel raw material. (Graphic: UK travel, https://fingfx.thomsonreuters.com/gfx/mkt/dgkplrnzdpb/UK%20travel.png)