London close: Stocks in the red as inflation falls less than expected

22nd May 2024 15:00

(Sharecast News) - London stocks ended in negative territory on Wednesday, as market participants reacted to the possibility of a summer general election and disappointing inflation data for April.

The FTSE 100 fell 0.55%, closing at 8,370.33 points, while the broader FTSE 250 declined by a more modest 0.35% to finish at 20,710.07 points.

In currency markets, sterling was last up 0.25% on the dollar, trading at $1.2741, while it increased 0.36% against the euro to change hands at €1.1752.

"The UK's inflation reading will steal the headlines today but it is the sharp drop in copper prices that is driving the losses for the FTSE 100," said IG chief market analyst Chris Beauchamp.

"Miners are down across the board as copper suffers its worst day so far this year. Investment funds have piled in over the past few months, and have done well, but profit-taking is finally making itself felt."

Beauchamp added that UK housebuilders suffered losses following the morning inflation reading.

"A June cut looks off the cards, and even August appears to be a tough call unless the sticky services inflation can be brought under control."

Investors watch general election rumours, inflation falls less than expected

Investors were busy parsing rumours and speculation of a summer general election in late trading, as cabinet ministers were seen arriving at 10 Downing Street through the afternoon.

Prime minister Rishi Sunak confirmed a general election for 4 July after market hours, with parliament set to be dissolved imminently.

In economic news, consumer price inflation fell less than anticipated in April.

According to the Office for National Statistics, inflation dropped to 2.3% from 3.2% in March, reaching its lowest level since July 2021 but still above the expected 2.1%.

The reduction in inflation was largely attributed to lower gas and electricity prices following the energy price cap adjustment by Ofgem.

Despite that, services inflation remained high at 5.9%, slightly down from March but exceeding forecasts.

Core inflation, excluding energy and food, also remained elevated at 3.9%, above the predicted 3.6%.

"There was another large fall in annual inflation led by lower electricity and gas prices, due to the reduction in the Ofgem energy price cap," said ONS chief economist Grant Fitzner.

"Tobacco prices also helped pull down the rate, with no duty changes announced in the Budget.

""Meanwhile food price inflation saw further falls over the year."

Public sector borrowing meanwhile surged more than expected in April, driven by a decline in National Insurance receipts.

The Office for National Statistics reported that public sector net borrowing, excluding banks, increased by £1.5bn year-on-year to £20.5bn, marking the fourth-highest April borrowing on record.

That figure surpassed the Office for Budget Responsibility's forecast of £19.3bn.

Central government receipts rose to £77.4bn, although compulsory social contributions fell by £1.5bn.

"If you cut the amount of NI workers are paying into government coffers, it stands to reason that the shortfall will have to be made up somewhere," said Danni Hewson, head of financial analysis at AJ Bell.

"In April it meant borrowing had to increase beyond what had been forecast, and more than needed this time last year.

"The overall tax take is up and interest payments on all that debt are down, but inflation-busting wage and benefit increases are putting additional strain on the public coffers."

House prices in the UK saw a modest increase in March, with the UK house price index from HM Land Registry showing a 0.7% rise in prices from February, with a year-on-year increase of 1.8%.

The average property value in the UK now stands at £283,000.

"The overall property market is steady, with pent up demand building and growing levels of stock for sale," said Stephen Perkins, managing director at Yellow Brick Mortgages.

"People have recalibrated to the new rate environment.

"The market is ready to explode when the Bank of England lights the fuse, but the latest set of inflation data may mean it keeps the match in its box for now."

Across the Atlantic, sales of second-hand homes declined more than expected in the US in April.

The National Association of Realtors reported a 1.9% month-on-month decrease, with sales totaling 4.14 million.

That also represented a 1.9% drop compared to the previous year.

Housebuilders in the red, M&S jumps on reinstated dividend

On London's equity markets, housebuilders faced a tough session as rate cut expectations were deferred.

Persimmon shares dropped by 1.34%, Taylor Wimpey declined by 1.44%, and Bellway saw the steepest fall at 2.33%.

The shift in rate expectations weighed heavily on the sector, reflecting investor concerns over future housing market conditions.

In contrast, Marks & Spencer Group surged by 5.19%.

The retailer reinstated its dividend and reported a significant increase in full-year sales and profits, signalling successful turnaround efforts.

Mitchells & Butlers experienced a robust rally, with shares jumping 9.96%.

The pub group announced that its full-year results were expected to be at the top end of consensus forecasts, buoyed by a rise in first-half profit.

SSE managed to reverse earlier losses, closing up 0.56% despite reporting a decline in full-year operating profit.

The energy company's resilience suggested confidence in its longer-term prospects despite the profit dip.

Similarly, RS Group clawed back from initial losses to end the day up 0.81%.

The industrial and electrical products provider, formerly known as Electrocomponents, reported a 25% drop in annual profits and an 8% fall in like-for-like revenues.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,370.33 -0.55%

FTSE 250 (MCX) 20,710.07 -0.35%

techMARK (TASX) 4,863.51 0.12%

FTSE 100 - Risers

Marks & Spencer Group (MKS) 288.00p 5.19%

Smith (DS) (SMDS) 376.80p 2.61%

B&M European Value Retail S.A. (DI) (BME) 554.80p 2.51%

Auto Trader Group (AUTO) 741.40p 2.04%

GSK (GSK) 1,788.50p 1.85%

Compass Group (CPG) 2,260.00p 1.35%

Intermediate Capital Group (ICG) 2,322.00p 1.04%

Diploma (DPLM) 4,252.00p 1.00%

Severn Trent (SVT) 2,639.00p 1.00%

SSE (SSE) 1,816.50p 0.97%

FTSE 100 - Fallers

Antofagasta (ANTO) 2,256.00p -6.39%

Glencore (GLEN) 483.00p -3.38%

Ocado Group (OCDO) 343.50p -3.24%

Barclays (BARC) 211.45p -2.80%

St James's Place (STJ) 465.80p -2.55%

WPP (WPP) 818.80p -2.45%

Rio Tinto (RIO) 5,690.00p -2.32%

Barratt Developments (BDEV) 499.60p -2.12%

3i Group (III) 2,898.00p -2.09%

Prudential (PRU) 782.60p -1.88%

FTSE 250 - Risers

IntegraFin Holding (IHP) 346.50p 11.06%

Mitchells & Butlers (MAB) 292.50p 9.96%

Hargreaves Lansdown (HL.) 979.00p 4.95%

Bytes Technology Group (BYIT) 569.50p 3.17%

Spire Healthcare Group (SPI) 266.00p 2.90%

Trustpilot Group (TRST) 225.00p 2.74%

Patria Private Equity Trust (PPET) 565.00p 2.73%

Bakkavor Group (BAKK) 133.00p 2.31%

British Land Company (BLND) 403.20p 2.13%

Baltic Classifieds Group (BCG) 243.50p 2.10%

FTSE 250 - Fallers

Close Brothers Group (CBG) 458.20p -6.68%

Pets at Home Group (PETS) 282.80p -5.92%

W.A.G Payment Solutions (WPS) 70.00p -5.66%

Harbour Energy (HBR) 304.90p -5.31%

Hochschild Mining (HOC) 165.40p -4.97%

SSP Group (SSPG) 182.00p -4.21%

Energean (ENOG) 1,134.00p -4.14%

Kainos Group (KNOS) 1,220.00p -3.94%

Bank of Georgia Group (BGEO) 4,030.00p -3.70%

Assura (AGR) 40.76p -3.55%