FTSE rebuilds after Covid and inflation fears knocked it over

“Once again the FTSE 100 is having to rebuild after a fresh wave of negative sentiment knocked it over on Thursday,” says AJ Bell Investment Director Russ Mould.

“What may spook investors is that usually the concerns have centred around either inflation or the risk of Covid-19 tilting the recovery off course.

“This time it appeared both fears were rearing their head at the same time – raising the spectre of stagflation or slowing economic growth accompanied by rapidly rising prices.

“Latest GDP figures for May in the UK show the pace of recovery is starting to grind a bit – even if a fourth consecutive month of growth is nothing to be sniffed at.

“We may get more insight into how central banks are weighing these issues later today with Bank of England chief Andrew Bailey and European Central Bank head Christine Lagarde set to participate in a panel discussion at a big finance summit in Venice.

“The question is whether central bankers feel they can navigate these risks as serenely as a gondola traversing a sleepy Venice canal or if they are worried about a torrent of rising inflation and infections overtaking them.

“There was a reminder that UK companies are still looking like appealing targets to overseas predators as drugmaker Vectura recommended a £1 billion takeover from tobacco firm Philip Morris.

“There seems to be an element of poacher turned gamekeeper for Philip Morris in this deal as it looks to use its expertise in inhalation for good – making Vectura’s inhaled drug delivery solutions a good fit.

“Vectura shareholders may be pleased this is an all-cash offer as many might have had ESG objections to being left with a position in a manufacturer of harmful cigarettes as opposed to a business working to improve people’s health.”

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