London Markets: FTSE 100 dragged south by banks and energy, while retail sales fall

Stocks fell in London on Friday, under pressure as investors backed away from the reflation trade, selling banks and energy companies. That’s as fresh data showed weaker retail sales, while rising COVID-19 cases from the Delta variant were also a worry.

The FTSE 100 index

fell 1.7% to 7,034.33. The pound slipped 0.4% to $1.3859. But the drop failed to help out U.K. stocks — as has been seen previously owing to the number of multinational companies earning revenue overseas on the index.

Investors were juggling a myriad of worries, starting with a hawkish Federal Reserve message on Wednesday that was taking a toll on reflation plays. The central bank lifted its inflation forecasts and its economic projections indicated two interest rates to come in 2023.

Shares of heavily weighted BP

up 23% so far this year alongside a more than 40% gain for oil prices, slid close to 3%, with Royal Dutch Shell


down 3.5%. U.S.

and Brent crude prices

fell close to 1% each.

Bank stocks were taking a hard hit, with shares of HSBC


down 2% and Lloyds Banking Group


and Standard Chartered

down more than 2% each.

Weak retail sales were also weighing on investors, with data showing a 1.4% drop in May, driven by decreases at food stores and on the heels of a sharp rise in the previous month, the Office for National Statistics said Friday. Economists polled by The Wall Street Journal expected retail sales to increase 1.6%.

The fall in May sales is “perhaps more indicative of a shift in spending habits rather than a decline, with consumers opting cut back on food purchases (-5.7%) in favor of eating out. That pressure on food sales does bring the supermarkets into focus, while data from Tesco further highlighted how demand growth has been slowing in recent months,” said .Joshua Mahony, senior market analyst at IG, in a note to clients.

Shares of Tesco UK:TSCO

fell 3.5%, after the British grocer reported a 1% rise in retail sales on the year on a comparable basis and said that its profit outlook for the full year remains unchanged.

Investors were also weighing up the latest troubling news on COVID-19. Delta variant cases in the U.K. rose by 33,630 in the week to June 8, to a total of 75,953, a 79% increase on the previous week, according to Public Health England data released on Friday.

U.K. Prime Minister Boris Johnson announced a delay to easing the country’s remaining COVID-19 restrictions earlier this week, citing concerns over those surging virus cases, even as the country’s vaccinations continue to roll out.

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