FTSE slips amid Middle East tensions and surging UK inflation

London’s stock markets faced a tumultuous day on Wednesday, with escalating tensions in the Middle East and unexpected spikes in UK inflation rattling investors. The FTSE 100 index closed down 1.1% at 7,588.00, while the FTSE 250 and AIM All-Share plummeted 1.6% and 0.8% respectively. Rising oil prices added to the mix, hitting $91.10 a barrel amid concerns over geopolitical stability in the region.

The anxiety was compounded by fresh tensions in the Middle East following a strike at a hospital in Gaza. US President Joe Biden attributed the incident to an ‘errant rocket fired by a terrorist group in Gaza,’ heightening concerns about regional stability.

Adding to the market jitters was a surprising surge in UK inflation. The Office for National Statistics reported a 6.7% annual increase in consumer prices for September, matching the August rate. Core consumer prices, excluding certain items, rose by 6.1% annually, cooling slightly from August but surpassing market forecasts. This unexpected inflationary pressure worried investors, thus impacting housebuilders. Berkeley Group fell 2.5%, Taylor Wimpey lost 4.3%, and Barratt Developments slumped 5.1%, with a pessimistic outlook exacerbating Barratt’s decline.

London-based business consultancy Kin & Carta bucked the trend, surging by an impressive 40%. The surge came on the heels of a takeover offer from UK private equity firm Apax Partners. Under the deal, Kin & Carta will receive 110 pence in cash for each share, representing a 41% premium to its closing price on Tuesday and valuing the company at approximately £203 million.

Meanwhile, in the mergers and acquisitions arena, Pendragon faced a whirlwind of bids and withdrawals. After receiving multiple takeover proposals, including a bid from AutoNation and a joint bid from Hedin Mobility Group and PAG International (Penske), Pendragon is now set on a clear path. The company agreed to sell its entire UK motor business and leasing business to Lithia Motors, turning its focus toward its Pinewood software as a service business.