The FTSE 100 added to a week of losses as markets braced for a large US interest rate rise following red-hot inflation numbers, while insurers tumbled on the back of a profit warning from small-cap Sabre (SBRE).

The blue-chip index was down 1%, or 72 points, at 7,084 as investors digested yesterday’s US inflation data, that showed the cost of goods and services was up 9.1% in the year to June versus 8.6% a month earlier. Markets are now braced for another large hike in rates from the US Federal Reserve, which could kickstart a recession in the world’s largest economy.

Neil Wilson, analyst at Markets.com, said: ‘Markets price in about a 75% chance that the Fed will raise rates by 100 basis points at its July meeting, pricing in much more aggressive tightening than prior to the report.

‘I think this is about right; the Fed has been very clear about where it stands on inflation and the strength of the labour market means there is no real reason not to go big.’

Closer to home, insurers took a battering this morning as Sabre issued a profit warning, sending its shares slumping 36%. The company announced a profit slump to £4.3m in the first six months of the year, down from £22.2m the previous year. 

The news had a knock-on effect on large-cap peer Admiral (ADM), which led the blue chips lower, shedding 7.8% to trade at £21.75, while Direct Line (DL) was a major loser on the FTSE 250, falling 6.3% to 221p.

Elsewhere on the FTSE 100, Barratt Developments (BDEV) lost 3.2%, or 14p, to trade at 450p despite completions returning to pre-pandemic levels and the housebuilder forecasting that profit will come in slightly ahead of expectations this year.

Richard Hunter, head of markets at Interactive Investor, said the fall in the shares proved ‘the growing chasm between the actual trading performance and the depressed share price peformances within the sector’.

Fears of a global economic slowdown continued to weigh on commodity stocks. Fresnillo (FRES) was down 2%, or 13p, at 670p, Rio Tinto (RIO) fell 1.1%, or 53p, to £47.39 and Anglo American (AAL) weakened 0.8%, or 22p, to £26.63.

The FTSE 250, which slipped 0.4%, or 67 points, to 18,644, was led lower by gaming technology business Playtech (PTEC). Shares in the group slipped 16%, or 83p, to 432p after Hong Kong-based TTB Partners abandoned its bid citing the challenging market environment. Playtech said it was confident ‘about the positive long-term prospects’ for the business.

In investment trust news, Hipgnosis (SONG ) was up 4% at 112p after the song royalties fund reported full year revenues jumped by 24.7% to $200m.