The domestically focused mid-cap FTSE 250 index dropped 1.6%, declining more than 11% so far in the June quarter
UK’s FTSE 100 dropped on Thursday and was set for its first quarterly drop since September 2020, as concerns grew that prolonged inflationary pressures would force central banks to act aggressively, leading to a global economic downturn.
The blue-chip index shed 1.6% and was on course for its biggest monthly decline since September 2020. Still, its exposure to commodity-linked firms and global companies helped it outperform its global peers this year.
The FTSE 100 has very little to do with the UK economy itself, so the local recession is less impactful, said Azad Zangana, a senior European economist and strategist at Schroders.
But if we were to see a global recession, we would eventually see a hit to demand for commodities, so that area could potentially suffer, he said.
The domestically focused mid-cap FTSE 250 index dropped 1.6%, declining more than 11% so far in the June quarter, as investors price in lower UK economic growth and corporate profits in the wake of soaring inflation, which the Bank of England expects would exceed 11% in October.
The FTSE 250 index is already in a bear market, down more than 23% after scaling a record closing high in September 2021.
Britain’s economy grew by an expected 0.8% in the first quarter, but risks shrinking in the second quarter due to a hit to demand as inflation jumped to a 40-year high of 9.1%.
Retailers such as B&M European Value Retail and Burberry dropped more than 4% on Thursday to lead losses on the FTSE 100.
Heavyweight oil companies BP Plc and Shell fell 1.0% and 1.7%, respectively, while industrial metal and mining stocks also declined.
HSBC Holdings, Lloyds and Natwest Group dropped between 1.3% and 1.6% after Barclays cut its price targets for the stocks.
Bunzl Plc added 1.6% after the business supplies distributor said it expected higher annual revenue, benefiting from red-hot inflation and acquisitions in the past year.