London close: Stocks close lower on UK deflation, weak Chinese trade data

The FTSE 100 ended down 28.90 points to 6,342.28 on Tuesday as September data showed the UK experienced deflation and China’s exports and imports declined.

The Office for National Statistics said the UK consumer price index fell 0.1% year-on-year last month, compared to analysts’ estimates for a flat reading in line with August.

On a month-on-month comparison, CPI also dropped 0.1% in September following a 0.2% increase in August. Analysts had predicted 0% growth.

The main driver of deflation was discounting at clothing stores and falling petrol and diesel prices.

“As UK year-on-year inflation hit negative territory for only the second time since 1960, the impact of persistent disinflation upon Bank of England decision making will no doubt have been playing into traders mind-sets, sending GBP-USD 130 points lower within two hours,” said IG market analyst Joshua Mahony.

“However, it is also worth bearing in mind that with wages growing at the fastest rate in over a decade, this is a benefit for the consumer and helps make up for all those years where real wages fell repeatedly.”

Chinese trade

Chinese exports decreased 3.7% in September from a year earlier in US dollar terms following a 5.5% drop in August, the General Administration of Customs revealed. Analysts had expected a 6% slide.

Imports plunged 20.4% last month, worse than the 15.9% dip predicted, after a 13.8% fall in August.

The trade balance, however, unexpectedly widened to $60.34bn in September from $60.24bn a month earlier when a surplus of $47.90bn had been forecast.

“Chinese trade figures have been a source of concern for some time now, with both dollar-denominated exports and imports having contracted for most of the year when compared to 12 months previous,” said Craig Erlam, senior market analyst at Oanda.

“The biggest concern is the huge decline in imports and while a large part of this can be attributed to the collapse in commodity prices and should therefore ease of in the coming months, there does also appear to be a domestic demand problem as well.”

McCafferty calls for rate rise

BoE policymaker Ian McCafferty has reiterated that interest rates need to rise to allow more scope for cuts in the event of a financial crisis.

In a testimony to the Treasury Committee on the hearing of McCafferty’s reappointment to the Monetary Policy Committee on Tuesday, he said there was a need to return the Bank Rate far enough above zero “to a level at which it can be an effective instrument” in tightening or loosening policy. Last Thursday, McCafferty voted in favour of raising interest rates to 0.75% from 0.50%. He was once again the only policymaker to recommend the move.

Royal Mail tops FTSE fallers

Royal Mail was in the red on news the government has sold its remaining stake in the postal service group to professional investors.

Luxury fashion retailer Burberry was under the cosh amid renewed worries about China – to which it is heavily exposed – following disappointing trade figures.

Barclays edged lower on reports the bank may name US investment banker Jes Stanley as its new chief executive.

Going the other way, SABMiller jumped after the brewer agreed to a £68bn takeover offer from AB InBev.

Housebuilders rallied in line with FTSE 250 peer Bellway which gained after posting a 44% jump in full-year profits that beat expectations. Persimmon, Barratt Developments and Taylor Wimpey were both firmly in the black.

Pharmaceuticals giant GlaxoSmithKline was also on the front foot after JPMorgan Cazenove upgraded the stock to ‘neutral’ from ‘underweight’ and lifted the price target to 1,370p from 1,320p. The bank noted that medium-term consensus earnings per share estimates have fallen 15-18% year-to-date and expectations now look achievable, with downgrades no longer a concern.

Market Movers

techMARK 3,034.34 -0.00%

FTSE 100 6,341.41 -0.47%

FTSE 250 16,902.78 -0.50%

FTSE 100 - Risers

SABMiller (SAB) 3,949.50p +9.06%

GlaxoSmithKline (GSK) 1,328.50p +1.72%

Persimmon (PSN) 1,967.00p +1.60%

Carnival (CCL) 3,384.00p +1.50%

Inmarsat (ISAT) 929.00p +1.42%

Berkeley Group Holdings (The) (BKG) 3,250.00p +1.25%

International Consolidated Airlines Group SA (CDI) (IAG) 577.00p +1.23%

Barratt Developments (BDEV) 633.50p +1.20%

easyJet (EZJ) 1,725.00p +1.17%

Taylor Wimpey (TW.) 192.70p +1.05%

FTSE 100 - Fallers

Royal Mail (RMG) 453.30p -4.00%

Tesco (TSCO) 194.30p -3.74%

G4S (GFS) 248.20p -3.27%

Burberry Group (BRBY) 1,427.00p -3.25%

Aberdeen Asset Management (ADN) 333.80p -3.11%

Standard Chartered (STAN) 739.40p -3.05%

Johnson Matthey (JMAT) 2,520.00p -2.85%

Sainsbury (J) (SBRY) 263.80p -2.73%

Old Mutual (OML) 205.30p -2.61%

Glencore (GLEN) 118.00p -2.60%

FTSE 250 - Risers

Michael Page International (MPI) 483.50p +4.16%

Bellway (BWY) 2,453.00p +3.50%

Spire Healthcare Group (SPI) 368.30p +3.40%

Sophos Group (SOPH) 231.90p +3.25%

Auto Trader Group (AUTO) 330.00p +2.96%

Crest Nicholson Holdings (CRST) 540.50p +2.85%

Virgin Money Holdings (UK) (VM.) 399.90p +2.51%

BTG (BTG) 573.00p +2.32%

CLS Holdings (CLI) 1,790.00p +2.11%

Vectura Group (VEC) 165.10p +2.10%

FTSE 250 - Fallers

Kaz Minerals (KAZ) 135.40p -6.30%

Evraz (EVR) 89.20p -5.56%

Weir Group (WEIR) 1,284.00p -4.75%

IMI (IMI) 1,012.00p -4.17%

Vedanta Resources (VED) 578.50p -4.14%

Rotork (ROR) 179.10p -3.92%

Home Retail Group (HOME) 144.60p -3.73%

Homeserve (HSV) 411.00p -3.54%

Bodycote (BOY) 556.50p -3.30%

Ashmore Group (ASHM) 282.50p -3.19%

FTSE TechMARK - Risers

NCC Group (NCC) 260.00p +4.00%

Dialight (DIA) 664.00p +1.37%

Oxford Biomedica (OXB) 7.38p +1.37%

Triad Group (TRD) 31.50p +0.80%

Gresham Computing (GHT) 110.50p +0.45%

Skyepharma (SKP) 337.25p +0.30%

FTSE TechMARK - Fallers

Sarossa (SARS) 1.82p -4.71%

SDL (SDL) 383.75p -4.06%

Spirent Communications (SPT) 73.25p -2.98%

Oxford Instruments (OXIG) 677.00p -0.73%

Innovation Group (TIG) 39.50p -0.63%

BATM Advanced Communications Ltd. (BVC) 19.75p -0.63%

E2V Technologies (E2V) 235.50p -0.63%

XP Power Ltd. (DI) (XPP) 1,505.00p -0.33%

Ricardo (RCDO) 902.00p -0.28%

KCOM Group (KCOM) 90.75p -0.27%