Paper and packaging firms sank into the red after an American parcels giant warned its business was being hit by weaker demand and rising costs.
FedEx’s revenues of £71billion in the year to the end of May fell well short of analyst estimates.
The group, which also said it has been affected by a global shipping downturn, warned sales for 2024 were likely to be flat.
Raj Subramaniam, who took over as FedEx president and chief executive a year ago, said in April that the company will consolidate its express package and ground delivery units to save £3.14billion by the end of 2025.
The group has also cut flights, ground older planes and reduced its workforce.
Falling demand: FedEx said it has been affected by a global shipping downturn and warned sales for 2024 were likely to be flat. This sparked a sell-off of paper and packaging firms
FedEx’s bleak outlook sparked a sell-off in London, with Smurfit Kappa down 5.5 per cent, or 154p, to 2664p, Mondi sliding 3.3 per cent, or 41p, to 1198p and DS Smith falling 6 per cent, or 18.4p, to 290.2p.
Danni Hewson, head of financial analysis at AJ Bell, said: ‘Typically seen as an economic bellwether, the logistics group has flagged ongoing demand weakness which has put pressure on the business to find more ways to cut costs.
‘A pullback in e-commerce activity after the pandemic boom is certainly hurting, so too is the higher cost of borrowing which has caused businesses and consumers to think harder about where they spend money.’
The FTSE 100 fell 0.1 per cent, or 10.13 points, to 7559.18 and the FTSE 250 was down 0.9 per cent, or 174.71 points, to 18571.45.
Inflation in the UK remained stubbornly high at 8.7 per cent in May – the same as the previous month – and higher than the 8.4 per cent economists had expected.
That set the scene for tomorrow’s expected interest rate hike from 4.5 per cent to 4.75 per cent by the Bank of England.
Some in the City believe that officials on Threadneedle Street could go even further and increase rates to 5 per cent.
Stock Watch – Tekmar
Shares in Tekmar soared 23 per cent, or 2.13p, to 11.38p as it eyed a return to profit.
The firm, which makes undersea power cable coatings for wind turbines, narrowed its losses to £600,000 in the six months to the end of March.
It made a £1.8million loss during the same period a year ago.
The business raised fresh funds in April and now expects to break even by the end of its financial year in September, before returning to profit 12 months later.
Victoria Scholar, head of investment at Interactive Investor, said: ‘Britain is stuck with the highest inflation rate in the developing world as a tight labour market with worker shortages and strong wage growth add to business costs, which are getting passed on to consumers in terms of higher prices.
Prime Minister Rishi Sunak’s goal to halve inflation by the end of the year is starting to look less likely.
‘As we approach the halfway mark of 2023, inflation ideally would be closer to 7.5 per cent to put him on track to achieve his target of bringing inflation back to around 5 per cent by year-end, yet inflation remains closer to 9 per cent.’
Rathbones slid 3.8 per cent, or 74p, to 1894p after Barclays cut the wealth manager’s rating to ‘underweight’ from ‘equal-weight’ and lowered the target price to 1950p from 2050p.
Sondrel shares rose 0.8 per cent, or 0.5p, to 67p after Sarasin & Partners LLP increased its stake in the semiconductor chip designer and supplier from 4.16pc to 5.08 per cent.
Liontrust Asset Management traded lower after net outflows from its funds hit a record £4.8billion for the year to the end of March as clients pulled their money out.
The firm, which last month snapped up Swiss rival GAM for £93million, also saw its assets under management and advice fall 6 per cent to £31.4billion while profit plunged 38 per cent to £49.3million. Shares fell 2.1 per cent, or 16p, to 752.5p.
Miner Anglo American shares took a hit after its diamond arm De Beers said it was likely to have sold around £353million of rough diamonds between June 5 and June 20.
It said it would fall short on the £375million of sales it made during the previous sales cycle and £157million less than the same period a year ago. Anglo slid 2 per cent, or 48.5p, to 2336p.
