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London open: Stocks slump as UK inflation ticks higher
London stocks fell sharply in early trade on Wednesday as a surprise jump in UK inflation dampened rate cut hopes.
At 0840 GMT, the FTSE 100 was down 1.3% at 7,459.92.
Data released earlier by the Office for National Statistics showed that the consumer price index rose to 4% in the year to December from 3.9% in November, versus expectations for a drop to 3.8%. This marked the first jump in inflation since February 2023 and was driven by a rise in alcohol and tobacco prices.
Alcohol and tobacco inflation rose to 12.9% from 10.2%.
ONS chief economist Grant Fitzner said: “The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases.
“These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.
“Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remains lower than a year ago.”
Core inflation – which excludes food and energy – was unchanged at 5.1%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Frustration is in the air as UK inflation continues to prove stubborn. The slight rise in the headline rate to 4% is the last move companies and households wanted to see, as it pushes the prospect of interest rate cuts further down the line. There had been high hopes that with fuel costs falling and food price rises slowing, the headline rate of inflation would keep easing.
“With inflation still double the Bank of England’s target, policymakers are still likely to stay ultra cautious about the prospects for interest rate cuts this year. Worries are still swirling about the effect on prices of delays to goods arriving from Asia, given that attacks in the Red Sea are disrupting around 20% of global shipping. The tight labour market here in the UK will also be a cause for concern, despite signs that wage growth is easing.
“Downwards pressure on inflation is still expected, with the World Bank forecasting global growth to slow, and the UK economy at the edge of recession, this should act as a further drag on demand. But the Bank of England is not expecting inflation to reach 2% until the end of 2025. So, although cuts are being eyed in 2024, more patience will be needed.”
In equity markets, miners were under the cosh after China posted reported GDP growth, with Glencore, Antofagasta and Anglo American all down. Antofagasta was also in focus after a production report.
Housebuilders lost ground as the inflation data dashed early rate cut hopes, with Persimmon, Barratt Developments and Vistry all in the red.
Ibstock fell as the building products supplier said full-year revenues are expected to have fallen by 21% to around £405m.
888 tumbled as the William Hill owner warned that adjusted earnings before interest, taxes, depreciation and amortisation for 2024 were set to be at the low end of the consensus range due to extra investment.
Education publisher Pearson fell despite hailing a a strong 2023 financial performance, with a 5% increase in underlying group sales and a jump in adjusted operating profit.
On the upside, IMI was boosted by an upgrade to ‘buy’ from ‘neutral’ at Goldman Sachs.
Keller gained as it said 2023 underlying operating profit was expected to be “significantly ahead” of market expectations after a particularly strong end to the year.
BP was in the spotlight as it named its former chief financial officer Murray Auchincloss as its permanent chief executive, after having served in an interim capacity for the past four months.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smith & Nephew Plc | +1.22% | +13.00 | 1,078.00 |
| 2 |  |
International Consolidated Airlines Group S.a. | +0.18% | +0.25 | 142.35 |
| 3 |  |
Rolls-royce Holdings Plc | +0.07% | +0.20 | 298.40 |
| 4 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 5 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 6 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 7 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 8 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
| 9 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 10 |  |
Standard Life Aberdeen Plc | +0.00% | +0.00 | 274.10 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Persimmon Plc | -4.60% | -67.50 | 1,401.00 |
| 2 |  |
Prudential Plc | -3.90% | -31.40 | 773.80 |
| 3 |  |
Ocado Group Plc | -3.85% | -23.80 | 594.20 |
| 4 |  |
Glencore Plc | -3.75% | -16.45 | 422.70 |
| 5 |  |
British Land Company Plc | -3.71% | -14.70 | 381.40 |
| 6 |  |
Barratt Developments Plc | -3.42% | -18.40 | 519.20 |
| 7 |  |
Land Securities Group Plc | -3.41% | -22.80 | 645.60 |
| 8 |  |
St. James’s Place Plc | -3.21% | -20.20 | 609.00 |
| 9 |  |
Fresnillo Plc | -3.18% | -16.00 | 486.80 |
| 10 |  |
Antofagasta Plc | -3.11% | -50.50 | 1,571.50 |
Wednesday newspaper round-up: Drax, BT, Royal Mail, Heathrow
Drax has received permission from the government to fit carbon capture technology to its wood-burning power plant, in a project that could cost bill-payers more than £40bn. The energy secretary, Claire Coutinho, on Tuesday approved the project to convert two of its biomass units to use the technology. – Guardian
BT has become the first major telecoms company to scrap controversial above-inflation price rises for mobile and broadband customers – but not before pushing through a final increase this year. The owner of mobile operator EE has moved to address the pressure on consumers from rising household costs during the cost of living crisis, after telecoms companies were criticised for increasing bills. – Guardian
Royal Mail has warned that it may need a taxpayer bailout to keep the postal service afloat amid a sharp decline in letter sending. Martin Seidenberg, the chief executive, said it was “simply not sustainable” to maintain a delivery network built for 20bn letters when the company was now only delivering 7bn. – Telegraph
A director of the competition regulator has pledged to recuse himself from any review of the Abu Dhabi-backed takeover of The Telegraph owing to potential conflicts of interest. Murdoch MacLennan, a non-executive board member of the Competition and Markets Authority (CMA), was chief executive of Telegraph Media Group between 2004 and 2017. – Telegraph
Banks could face a £10 billion compensation bill for unfair car finance deals, analysts have suggested. Last week the Financial Conduct Authority said it would investigate whether those who took out loans before January 2021 were unfairly charged more expensive interest rates in return for higher levels of commission paid to car dealers. – The Times
Heathrow, Britain’s gateway to the world, faces further turmoil after investors accounting for 35 per cent of the airport said they are selling up. Their decision to quit follows the sale of its 25 per cent stake in the airport by the largest shareholder, Ferrovial. – The Times
