London open: Stocks nudge lower after inflation data

17th Jul 2024 07:43

(Sharecast News) - London stocks nudged down in early trade on Wednesday as investors mulled the latest UK inflation figures, with sticky services inflation dampening hopes of a rate cut in August.

At 0835 BST, the FTSE 100 was down 0.1% at 8,155.59.

Data released earlier by the Office for National Statistics showed that inflation was unchanged in June, in line with the Bank of England's target and consensus expectations.

The consumer price index grew by 2% in the year to June.

The ONS said that restaurant and hotel prices, which rose "strongly", were the largest upward contributor. Second-hand car costs fell, but by less than this time last year. However, that was offset by widespread sales pushing down clothing and footwear prices.

Core CPI, which excludes the more volatile elements of energy, food, alcohol and tobacco, rose by 3.5% in the 12 months to June, also unchanged on May.

The consumer prices index including occupiers' housing costs (CPIPH) also held steady compared to May, rising by 2.8%. Core CPIH was 4.2%.

The Bank of England is widely expected to cut rates, which currently stand at a 16-year high of 5.25%, later this summer.

However, while CPI remains at 2%, the BoE's long-term inflation target, the Monetary Policy Committee has flagged concerns about the level of core CPI.

Services sector CPI also remains high, unchanged at 5.7% in June, although further falls in food prices helped offset that partially.

Paul Dales, chief UK economist at Capital Economics, said: "By staying at 5.7% in June, services inflation remained well above the 5.1% rate in June that the BoE forecast back in May.

"Admittedly, a lot of that overshoot happened in April and May. And that didn't stop the BoE from sounding a bit dovish at the subsequent June policy meeting. Even so, the BoE expected services inflation to fall 0.2ppts in June, which didn't happen.

"And only some of the stickiness of services inflation in June may be due to the influence of Taylor Swift's concerts. They may have been behind some of the large rise in hotels inflation from 7.0% to 9.8%. But cultural services inflation, which would capture any influence from the ticket prices, dipped from 7.4% to 7.3%. As a result, it's not obvious that the BoE can ignore a chunk of the stickiness of services inflation.

"Tomorrow's release of the wage growth figures for May will shed a bit more light. But at the moment, we're becoming even less confident in our existing forecast that the BoE will cut interest rates from 5.25% to 5.00% at the next policy meeting in August."

In equity markets, HSBC was in focus as it promoted finance chief George Elhedery to the role of chief executive with effect from September, replacing outgoing boss Noel Quinn.

Antofagasta slumped as it warned that full-year production would be at the lower end of its guidance of 670-710,000 tonnes. Others miners were also weaker, with Glencore, Anglo American and Rio Tinto all down.

Legal & General was hit by a downgrade to 'sector perform' from 'outperform' at RBC Capital Markets.

Animal genetics firm Genus was under the cosh despite saying FY24 adjusted pre-tax profit was set to be in line with market expectations of between £58m and £61m.

Defence and aerospace group Babcock fell even as it reported a 34% surge in underlying profits in the year ended 31 March despite a £90m hit on a ship-building contract with the Royal Navy.

Market Movers

FTSE 100 (UKX) 8,155.59 -0.11%

FTSE 250 (MCX) 21,162.44 -0.24%

techMARK (TASX) 4,809.21 -0.43%

FTSE 100 - Risers

Smurfit Westrock (DI) (SWR) 3,776.00p 1.64%

Burberry Group (BRBY) 713.00p 1.19%

Entain (ENT) 674.40p 0.87%

Severn Trent (SVT) 2,491.00p 0.73%

Coca-Cola HBC AG (CDI) (CCH) 2,706.00p 0.59%

Barclays (BARC) 228.70p 0.59%

Vodafone Group (VOD) 69.76p 0.55%

Lloyds Banking Group (LLOY) 58.80p 0.51%

BT Group (BT.A) 138.30p 0.47%

Imperial Brands (IMB) 2,054.00p 0.44%

FTSE 100 - Fallers

Antofagasta (ANTO) 2,048.00p -3.76%

Legal & General Group (LGEN) 227.20p -1.39%

Intermediate Capital Group (ICG) 2,188.00p -1.00%

Convatec Group (CTEC) 243.80p -0.81%

Pershing Square Holdings Ltd NPV (PSH) 4,146.00p -0.81%

Rio Tinto (RIO) 5,030.00p -0.81%

Auto Trader Group (AUTO) 816.20p -0.78%

Sage Group (SGE) 1,051.00p -0.76%

Glencore (GLEN) 455.50p -0.67%

Aviva (AV.) 480.10p -0.66%

FTSE 250 - Risers

IP Group (IPO) 43.90p 4.03%

Workspace Group (WKP) 640.00p 2.40%

Bodycote (BOY) 736.00p 1.52%

Watches of Switzerland Group (WOSG) 397.80p 1.38%

Aston Martin Lagonda Global Holdings (AML) 154.10p 1.31%

Endeavour Mining (EDV) 1,845.00p 1.10%

Ocado Group (OCDO) 364.10p 1.00%

Bellway (BWY) 2,754.00p 0.88%

Vietnam Enterprise Investments (DI) (VEIL) 593.00p 0.85%

Mitie Group (MTO) 120.40p 0.84%

FTSE 250 - Fallers

Genus (GNS) 1,820.00p -4.41%

Grafton Group Ut (CDI) (GFTU) 1,006.60p -2.74%

Babcock International Group (BAB) 526.00p -2.32%

Syncona Limited NPV (SYNC) 121.00p -2.26%

Morgan Advanced Materials (MGAM) 330.00p -2.22%

Balanced Commercial Property Trust Limited (BCPT) 82.00p -2.15%

Henderson Smaller Companies Inv Trust (HSL) 896.00p -1.97%

Oxford Instruments (OXIG) 2,515.00p -1.95%

Breedon Group (BREE) 410.00p -1.91%

Assura (AGR) 41.76p -1.65%