The FTSE 100 closed in the red after traders digested another 40-year-high for UK inflation levels.
A consumer price index (CPI) inflation reading of 9.1% was in line with expectations for May, but rocketing producer prices showed inflationary woes are not likely to reverse any time soon.
Nevertheless, London’s index of top stocks finished the day with a slight improvement on early trading after growing positivity on Wall Street.
The FTSE 100 ended the day down 62.83 points, or 0.88%, at 7,089.22.
Michael Hewson, chief market analyst at CMC Markets UK, said: “The fragile nature of this week’s rebound has been laid bare today, with a sharp slide in oil prices in Asia, spilling over into broader market weakness, with the Dax sliding below last week’s lows, before rebounding, while the FTSE has also slipped back sharply.
“Today’s inflation numbers from the UK came across as rather mixed in the same way as the US inflation numbers a couple of weeks ago, with core prices softening, however PPI prices continued to push higher, suggesting that there is still a lot of price pressure still in the pipeline.”
Concerns over these pressures in the production sector weighed on commodity stocks, pulling Glencore, Antofagasta and the oil majors lower.
Elsewhere in Europe, the other key markets followed the Asian markets lower.
The German Dax decreased by 1.02% by the end of the session, while the French Cac fell 0.77%.
In the US, the main markets opened lower but crept steadily to gains as Fed chair Jerome Powell sought to allay concerns over inflation.
Meanwhile, the pound was down 0.21% against the dollar at 1.228 and dropped by 0.11% against the euro at 1.16 after the significant inflation reading.
In company news, JD Sports investors had a positive day after the high street retailer unveiled plans to overhaul its corporate governance and internal controls as it looks to “draw a line in the sand” after the departure of its long-term boss and a string of competition probes.
Interim bosses unveiled an 18-month plan as the group also revealed a record £947.2 million annual profit haul – more than double the £421.3 million seen the previous year.
Shares jumped by 7.05p to 113.85p as a result.
Micro Focus tumbled after it posted a sharper-than-predicted downturn in sales for the past year.
The software company fell by 58p to 299.5p revealed that sales slid by 8.7% to 1.27 billion US dollars (£1.04 billion) over the year to April amid declines in its consulting, licence and maintenance operations.
Meanwhile, Natwest climbed by 6.7p to 228p after the Government confirmed it extended its plan to sell off more of its stake in the banking firm by a year.
The price of oil slid to new monthly low amid concerns that a demand recovery in Asia could take longer than previously expected.
Brent crude decreased by 3.03% to 111.27 US dollars per barrel when the London markets closed.
The biggest risers on the FTSE 100 were JD Sports, up 7.05p at 113.85p, Centrica, up 3.66p at 83.54p, Natwest, up 6.7p at 228p, Admiral, up 59p at 2,162p, and Rentokil, up 10.8p at 460p.
The biggest fallers of the day were Glencore, down 33.25p at 449.35p, Antofagasta, down 85.5p at 1,244p, Rolls-Royce, down 4.72p at 86.11p, Anglo American, down 167p at 3,207p, and Rio Tinto, down 231p at 5,019p.
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