London close: Stocks mixed as UK inflation slows to BoE target

19th Jun 2024 15:25

(Sharecast News) - London stocks ended the day with mixed results on Wednesday, as new data indicated a decrease in annual consumer price inflation, aligning with the Bank of England's target of 2% for May.

However, services inflation remained a concern, maintaining elevated levels.

The FTSE 100 saw a modest gain of 0.17%, closing at 8,205.11 points, while the FTSE 250 finished with a slight decline of 0.14%, ending the session at 20,381.05.

In currency markets, sterling was last up 0.12% on the dollar, trading at $1.2724, while it edged up 0.05% against the euro to change hands at €1.1839.

"A quiet session without the US has been enlivened by the return of UK inflation to 2%," said IG chief market analyst Chris Beauchamp.

"As is so often the case, the headline figure doesn't tell the full story, and higher services inflation has dampened hopes of an August cut by the Bank of England.

"Nonetheless, the FTSE 100 managed to eke out a small gain in thin trading, taking its cue from the stronger Asian session overnight."

Beauchamp added that the first two days of the week saw the wave of selling in European markets come to a halt, although warnings about fiscal stress in the eurozone had now caused traders to hit the sell button again.

"Eurozone governments of all types face a host of challenges, but are unlikely to find popularity if they go down the fiscal austerity route.

"France's current troubles could be a template for what's to come, putting further pressure on European markets."

UK consumer inflation finally falls to BoE target

In economic news, the Office for National Statistics reported that annual consumer price inflation in the UK decreased to 2% in May, down from 2.3% in April.

That marked the first time inflation had met the Bank of England's target since July 2021, potentially paving the way for a rate cut this summer.

Inflation peaked at 11.1% in October 2022, the highest since 1981.

The primary contributors to the decrease were lower prices in food and non-alcoholic beverages, recreation and culture, and furniture and household goods.

Despite the overall decline, transport costs saw the largest upward contribution.

Food and non-alcoholic drink prices rose by 1.7%, the lowest annual rate since October 2021, continuing a 14-month trend of easing from a high of 19.2% in March 2023.

Services inflation fell slightly to 5.7% in May, missing expectations of a drop to 5.5%, while core inflation, excluding volatile items, eased to 3.5% from 3.9%, as expected.

"The lack of progress made on core service prices, which include the costs of recreation and culture, eating out and staying in hotels, is keeping the Bank of England cautious when it comes to cutting interest rates," said Kathleen Brooks, research director at XTB.

"It also explains the muted reaction to the pound on the back of this report, GBP-USD has risen in the immediate aftermath and is back above $1.2720."

UK house prices meanwhile increased for the fourth consecutive month in April, according to preliminary estimates from the ONS.

The average house price reached £281,373, a 0.3% rise from March.

Prices had shown moderate monthly growth since December, when the average was £279,123.

Year-on-year, house prices were 1.1% higher compared to April 2023, up from the 0.9% growth in March.

The south east of England saw the largest monthly increase with a 1.4% rise to £375,067, while Yorkshire and the Humber experienced the greatest decline, falling 1.4% to £203,110.

In London, house prices dipped slightly by 0.2%, settling at £501,880.

On the continent, eurozone construction output fell by 0.2% in April compared to the previous month, according to flash estimates from Eurostat.

In contrast, output across the broader European Union rose by 0.2%.

On an annual basis, construction production dropped by 1.1% in the euro area and by 0.9% in the EU.

That followed a March decline of 0.5% in the euro area and 0.6% in the EU, indicating ongoing challenges in the construction sector.

Smurfit Kappa in the green, housebuilders under pressure

On London's equity markets, Smurfit Kappa Group saw a significant increase of 4.81% after S&P Dow Jones Indices announced that Smurfit WestRock, the newly formed company from the merger of Smurfit and WestRock, would be included in its indices.

Sector peers DS Smith and Mondi also experienced gains, with DS Smith rising 0.46% and Mondi edging up 0.24%.

Elsewhere, Vodafone Group advanced 1.42% following the company's announcement of raising €1.7bn through the sale of an 18% stake in Indus Towers via an accelerated bookbuild process.

Games Workshop Group soared 9.17% after the Warhammer maker forecasted a substantial increase in annual pre-tax profits to at least £200m, up from £171m the prior year.

JTC climbed 6.23% after disclosing late on Tuesday that it had agreed to acquire FFP, a provider of specialist fiduciary services, for up to $110m.

On the downside, Berkeley Group Holdings slid 6.31%, despite raising its earnings outlook for the current financial year by 5% and revealing plans to enter the London rental market.

Other housebuilders also faced declines, with Persimmon down 2.81%, Taylor Wimpey decreasing by 2.48%, and Barratt Developments falling 2.74%.

Spectris dropped 6.19% after the precision instrumentation and controls group warned that full-year profits would be at the lower end of market forecasts due to weaker-than-expected demand in its lab equipment division in the first half.

Additionally, the company announced the appointment of Royal Mail's chief financial officer Angela Noon as its new CFO.

Helios Towers tumbled 7.79% after Newlight and RIT sold a combined 37.6 million shares in the company at 115p each, raising about £43.2m.

That marked their first sale since Helios Towers' initial public offering in 2019.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,205.11 0.17%

FTSE 250 (MCX) 20,381.05 -0.14%

techMARK (TASX) 4,795.00 -0.20%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 3,750.00p 4.81%

Beazley (BEZ) 696.50p 2.28%

JD Sports Fashion (JD.) 119.80p 1.65%

Anglo American (AAL) 2,428.50p 1.65%

Vodafone Group (VOD) 71.64p 1.42%

International Consolidated Airlines Group SA (CDI) (IAG) 170.05p 1.19%

Centrica (CNA) 134.35p 1.17%

Rolls-Royce Holdings (RR.) 472.50p 0.98%

HSBC Holdings (HSBA) 692.70p 0.95%

Aviva (AV.) 478.20p 0.84%

FTSE 100 - Fallers

Berkeley Group Holdings (The) (BKG) 4,694.00p -6.31%

SEGRO (SGRO) 891.20p -3.00%

Spirax Group (SPX) 8,405.00p -2.89%

Persimmon (PSN) 1,365.00p -2.81%

Barratt Developments (BDEV) 468.70p -2.74%

Taylor Wimpey (TW.) 143.75p -2.48%

Scottish Mortgage Inv Trust (SMT) 877.40p -2.19%

Land Securities Group (LAND) 609.50p -1.85%

Intermediate Capital Group (ICG) 2,216.00p -1.68%

Burberry Group (BRBY) 964.20p -1.59%

FTSE 250 - Risers

Games Workshop Group (GAW) 10,300.00p 9.17%

JTC (JTC) 955.00p 6.23%

CMC Markets (CMCX) 281.00p 4.46%

Future (FUTR) 1,032.00p 3.72%

Senior (SNR) 164.40p 3.01%

Foresight Solar Fund Limited (FSFL) 89.90p 2.28%

Asia Dragon Trust (DGN) 407.00p 2.26%

4Imprint Group (FOUR) 5,930.00p 2.24%

Fidelity Emerging Markets Limited Ptg NPV (FEML) 694.00p 2.06%

North Atlantic Smaller Companies Inv Trust (NAS) 3,900.00p 2.05%

FTSE 250 - Fallers

Helios Towers (HTWS) 113.60p -7.79%

Renishaw (RSW) 3,890.00p -5.70%

Spectris (SXS) 3,026.00p -5.67%

Essentra (ESNT) 164.60p -3.74%

SSP Group (SSPG) 160.00p -3.03%

C&C Group (CDI) (CCR) 154.60p -3.01%

British Land Company (BLND) 424.20p -2.53%

Big Yellow Group (BYG) 1,162.00p -2.35%

Close Brothers Group (CBG) 437.20p -2.24%

Abrdn (ABDN) 144.35p -2.24%