US stocks dive after inflation data dampens hopes of interest rate cuts

US stocks have dived while UK stock markets remained steady as investors reacted to fresh inflation data from across the pond, raising concerns that interest rate cuts could came later than expected.

London’s FTSE 100 nearly surpassed the 8,000 mark during the day but lost some of its gains in the afternoon.

It was up 26.42 points, or 0.33%, to 7,961.21 at the close, with a strong showing for retailers following Tesco publishing its yearly results.

It was a more mixed session for European peers, with Germany’s Dax closing 0.11% higher and France’s Cac 40 down 0.05%.

Over in the US, top stock indices started the day’s trading with significant losses following the release of the latest official inflation data, which showed that prices rose faster than expected last month.

Consumer prices rose 3.5% in March, up from 3.2% in February, the US Labour Department said.

Janet Mui, head of market analysis at RBC Brewin Dolphin, said: “US inflation has come in hotter than expected for the third consecutive month, which killed off the chance of a rate cut in June.

“This is a highly consequential inflation report given that we have seen a string of stronger-than-expected data from the US in recent weeks and markets were already unsure whether the Federal Reserve can ease policy as guided.

“Although inflation is moving in the right direction, the market is losing patience on the path to the destination.

“Markets have now pushed back the timing of the first rate cut to September and expect only two cuts this year rather than three.”

By the time European markets closed, the S&P 500 was down about 1.1% and the Dow Jones was down 1.3%.

The pound tumbled against the US dollar following the release of inflation data, and the expectation that interest rates could stay higher for longer.

Sterling was down 1.1% to 1.254 dollars. The pound was more or less flat against the euro at 1.168.

Tesco climbed to the top of the FTSE 100 after a strong set of annual results (Joe Giddens/PA)

In company news, Tesco was the biggest riser on the FTSE 100 after telling shareholders that its annual pre-tax profits had almost tripled compared with a year earlier.

The supermarket giant said price pressures had eased significantly and that shoppers had bought more products, helping drive higher retail sales. Its share price closed 3.3% higher.

Meanwhile, shares in THG fell by a 10th despite revealing an improved performance with its pre-tax losses nearly halving over the year and revenues returning to growth in the final quarter.

Nevertheless, the online retailer reported a decline in annual revenues across all of its divisions – nutrition, beauty and Ingenuity – after a somewhat turbulent year. Its share price was down 11% at the close.

The biggest risers on the FTSE 100 were Tesco, up 10.3p to 297.8p, HSBC, up 18.9p to 663.6p, RS Group, up 12.5p to 723.5p, Next, up 150p to 8,892p, and Reckitt, up 67p to 4,307p.

The biggest fallers on the FTSE 100 were Ocado, down 12.6p to 368p, Barratt Developments, down 9.6p to 456p, Anglo American, down 44.5p to 2,147p, St James’s Place, down 8.4p to 432.6p, and United Utilities, down 16.8p to 995.2p.