London close: Stocks slip as US CPI slows, UK GDP stagnates

11th Sep 2024 16:51

(Sharecast News) - London's stock markets closed weaker on Wednesday, reflecting caution among investors following weaker-than-expected inflation data from the US and economic stagnation in the UK.

The FTSE 100 index finished down 0.15% at 8,193.94 points, and the FTSE 250 fell 0.58% to 20,537.25 points.

In currency markets, sterling was last down 0.36% on the dollar at $1.3033, as it lost 0.31% against the euro, changing hands at €1.1833.

"Traders were distinctly unimpressed by today's inflation report in the US, which failed to energise markets that are nervously awaiting next week's Fed rate cut," said IG chief market analyst Chris Beauchamp.

"It seems like every major event that might settle the issue of a 25 or 50 basis point cut turns out to be a damp squib, though the likelihood of a 50 basis point move does continue to recede.

"But with oil prices and other commodities having fallen sharply over the past week, there are real worries that sustained economic weakness is around the corner."

Beauchamp added that given the focus on the Fed, the US election had taken a bit of a back seat.

"A dismal Harris performance might have put Trump firmly back in the driving seat, but it still seems impossible for either candidate to edge firmly into the lead.

"Such uncertainty is just one more thing to keep investors in check at present."

Consumer inflation slows in the US, UK economy continues to stagnate

In economic news, the US saw a significant slowdown in the rise of consumer prices last month, driven by easing food inflation and falling energy costs.

According to the US Department of Labor, the headline consumer price index (CPI) increased by 2.5% year-on-year in August, down from 2.9% in July.

That was slightly below the 2.6% that economists had predicted.

On a monthly basis, food prices rose by just 0.1%, while energy costs declined by 0.8%.

However, core CPI, which excludes food and energy, remained steady at an annual rate of 3.2%.

Monthly gains in core CPI were slightly higher than anticipated at 0.3%, with shelter prices rising 0.5% and transportation services seeing a sharp 0.9% increase.

Paul Ashworth at Capital Economics highlighted how 70% of the gain in core CPI was the result of the 5.2% year-on-year rise in shelter prices.

"Overall, inflation appears to have been successfully tamed but, with housing inflation still refusing to moderate as quickly as hoped, it hasn't been completely vanquished.

"Under those circumstances, we expect the Fed to take a measured approach to cutting interest rates."

On home shores, economic stagnation continued in July, with no growth in the UK's gross domestic product (GDP), according to the Office for National Statistics.

That followed flat performance in June, and fell short of the 0.2% growth economists had forecast.

The services sector saw a modest 0.1% increase in output, but declines in production and construction output, down 0.8% and 0.4% respectively, weighed on overall economic performance.

"July's monthly services growth was led by computer programmers and health, which recovered from strike action in June," said Liz McKeown, director of economic statistics at the ONS.

"These gains were partially offset by falls for advertising companies, architects and engineers.

"Manufacturing fell, overall, with a particularly poor month for car and machinery firms, while construction also declined."

Trustpilot surges while Rentokil languishes

On London's equity markets, Trustpilot surged 11.1% after announcing that its first-half profits exceeded market expectations and unveiling a £20m share buyback.

WH Smith also performed well, climbing 10.84% as it reaffirmed its full-year outlook and revealed a £50m share buyback, boosted by a strong fourth quarter, during which group sales rose by 6%, or 4% on a like-for-like basis.

Associated British Foods edged up 1.23% following news that it would extend its share repurchase programme, adding £100m to the buyback initiative, set to run until mid-November.

Energean posted a 1.98% gain after reporting a significant increase in first-half profits, driven by record production levels in Israel.

On the downside, Rentokil Initial plummeted 19.68% after revising its full-year profit outlook downward due to weaker-than-expected summer trading in North America.

"While its business in the rest of the world is getting on OK, the company is struggling in North America," said Russ Mould, investment director at AJ Bell.

"Weaker than expected revenue has been compounded by problems of the company's own making such as insufficient control of costs hitting profitability.

"It seems in its desperation to boost revenue during the peak season, the company had too many staff."

Mould noted that the company also shelled out on overtime as it looked to boost business by increasing weekend working.

"This lack of discipline doesn't reflect well on the group, with measures to 'right-size' its workforce amounting to closing the stable door after the horse has bolted."

Elsewhere, Dunelm Group fell 3.56%, despite reporting higher full-year profit and sales, as it cited a challenging consumer environment and uncertain recovery prospects.

Rightmove slipped 0.12%, reversing earlier gains after rejecting a £5.6bn takeover bid from Australia's REA Group, deeming the offer "wholly opportunistic".

FirstGroup dropped 3.72% as the company announced the appointment of Lena Wilson as its new chair, effective February 2025, following interim leadership changes.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,193.94 -0.15%

FTSE 250 (MCX) 20,537.25 -0.58%

techMARK (TASX) 4,844.08 -0.22%

FTSE 100 - Risers

Entain (ENT) 706.60p 4.06%

Intermediate Capital Group (ICG) 2,152.00p 2.28%

Prudential (PRU) 613.20p 1.96%

BT Group (BT.A) 142.65p 1.86%

Lloyds Banking Group (LLOY) 57.44p 1.70%

Next (NXT) 10,190.00p 1.65%

Burberry Group (BRBY) 580.00p 1.58%

Rio Tinto (RIO) 4,630.50p 1.52%

NATWEST GROUP (NWG) 330.60p 1.47%

Vodafone Group (VOD) 76.58p 1.46%

FTSE 100 - Fallers

Rentokil Initial (RTO) 380.10p -20.06%

Smurfit Westrock (DI) (SWR) 3,272.00p -2.09%

Vistry Group (VTY) 1,350.00p -1.83%

Mondi (MNDI) 1,401.00p -1.79%

Berkeley Group Holdings (The) (BKG) 4,889.50p -1.77%

Centrica (CNA) 117.40p -1.76%

Ashtead Group (AHT) 5,162.00p -1.71%

Coca-Cola HBC AG (CDI) (CCH) 2,802.00p -1.55%

Diploma (DPLM) 4,374.00p -1.49%

Marks & Spencer Group (MKS) 351.70p -1.37%

FTSE 250 - Risers

Trustpilot Group (TRST) 216.00p 11.92%

WH Smith (SMWH) 1,360.00p 10.84%

Genus (GNS) 1,930.00p 4.32%

Kier Group (KIE) 150.20p 2.32%

BH Macro Ltd. GBP Shares (BHMG) 364.00p 2.25%

Senior (SNR) 163.80p 2.12%

Carnival (CCL) 1,113.50p 2.11%

Energean (ENOG) 903.00p 1.98%

Endeavour Mining (EDV) 1,616.00p 1.89%

Centamin (DI) (CEY) 149.60p 1.84%

FTSE 250 - Fallers

Ocado Group (OCDO) 325.20p -3.99%

Dr. Martens (DOCS) 63.30p -3.73%

FirstGroup (FGP) 152.90p -3.72%

Dunelm Group (DNLM) 1,191.00p -3.56%

Quilter (QLT) 131.60p -3.31%

Bloomsbury Publishing (BMY) 654.00p -3.25%

Close Brothers Group (CBG) 520.50p -2.98%

Indivior (INDV) 718.50p -2.84%

Currys (CURY) 75.50p -2.39%

Direct Line Insurance Group (DLG) 178.70p -2.35%