Economy  

UK and European markets rise amid concern over home market pressures

UK and European markets rise amid concern over home market pressures
 

European markets ended the day in positive territory yesterday (January 3), but there were warnings over the outlook for the UK.

The FTSE 100 climbed 1.37 per cent in trading yesterday (January 3), with the German Dax up 0.8 per cent and the French Cac 40 up 0.44 per cent.

European markets are expected to stay higher as data from Germany showed a drop in inflation, falling to 9 per cent for the first time since last summer, with the same expected in France.

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However, the outlook for the UK is not as positive, after data from the British Retail Consortium showed that UK food prices rose by 13.3 per cent in the 12 months to December.

Caution is expected to stay embedded in the shopper psyche, adding concerns to the prospects for consumer companies reliant on discretionary spending, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“[High food prices are] adding to worries that the inflation is still proving stubborn in some areas of the economy, indicating it may take some time for the price spiral to ease,” she said.

Myron Jobson, senior personal finance analyst at Interactive Investor, said the impact of higher prices on consumers is set to get worse.

“Christmas is typically a time of excess, and many budgets will still be reeling from spending on presents and festive treats,” he said.

“But inflationary pressures haven’t gone away during the festive period...Britons are facing higher energy cost in spring when the energy price cap increases, [and] bumper mortgage costs are set to put additional strain on finances.

“Many household budgets are bursting at the seams, and most of these price rises are inescapable as they impact the cost of everyday essentials.”

sally.hickey@ft.com