London close: Stocks extend losses as rate hike fears continue

UK stock markets faced a downturn on Wednesday, as gains from blue-chip insurers were overshadowed by concerns that the Bank of England could introduce another interest rate hike.

The FTSE 100 closed down 0.44% at 7,356.88 points, while the FTSE 250 dropped 0.42%, ending the trading day at 18,580.78.

In the currency space, sterling was last up 0.32% on the dollar to trade at $1.2746, while it gained 0.36% against the euro, changing hands at €1.1692.

“This morning’s inflation data from the UK has lifted sterling but put UK-focussed stocks on the back foot,” said IG chief market analyst Chris Beauchamp.

“While headline inflation numbers may look better, the resilience of core CPI means the Bank of England may have to work harder to fight inflation, risking a bigger downturn in the UK economy.

“This has weakened the FTSE 100, which has underperformed other European indices today as UK housebuilders and banks, among others, fall back.”

UK inflation rate eases; eurozone GDP shows modest growth

In economic news, UK consumer price inflation decelerated to 6.8% in July, impacted by a decline in food and energy costs, according to fresh data from the Office for National Statistics.

The latest inflation rate was down from June's 7.9%, matching economist predictions, but remained significantly above the Bank of England's desired 2% target.

In its release, the ONS highlighted that decreased costs in gas and electricity were the primary drivers behind the monthly downturn.

While food prices saw a hike in July, the increase was milder compared to the same month last year, thus assisting in the reduction of the year-on-year inflation rate.

Specific items such as milk, bread, and cereals were pinpointed as having notable downward pricing influences.

Conversely, hotel accommodations and air travel countered the trend, with the latter seeing fare increases in tandem with growing demand, leading to a considerable year-on-year growth rate of 29.8% - a surge from June's 26.7%, and marking the steepest ascent since May.

When focusing on core inflation, which dismisses the fluctuating prices of energy, food, alcohol, and tobacco, the July rate remained steady at 6.9%, consistent with the prior month.

Additionally, service sector inflation - an essential metric observed by the Bank of England for gauging domestic price pressures - nudged higher to 7.4% from 7.2%.

“This is a decidedly cup half full moment,” quipped AJ Bell analyst Danni Hewson.

“Firstly, inflation is still significantly above that two percent target and even if it is cooling off faster than a sunburnt Brit diving into a hotel pool, prices are not falling, they’re just not rising as fast as they have been.

“Then there are the secondary effects that have indeed become embedded in the UK economy - wage increases and price pressures have forced up service costs and that’s weaving its own nasty spell on core inflation.”

On the continent, the eurozone's GDP meanwhile experienced growth of 0.3% in the second quarter.

The final data showed the annual rate descending 0.5 percentage points to 0.6%, which aligned with the preliminary reading and consensus expectations.

Insurers on the rise as miners tumble

On London’s equity markets, Admiral Group saw a 7% uptick after it reported a 4% increase in its pre-tax profit, hitting £234m in the first half.

The profit boost came as the insurance company strategically increased prices in response to claims inflation.

Aviva also recorded gains, with stocks appreciating 1.63% on the back of 8% year-on-year growth in first-half operating profit to £715m.

The firm’s outlook remained optimistic, with the strong performance in the first half reinforcing its confidence.

B&M European Value Retail ascended 1.7% as speculation continued that the company could acquire competitor Wilko, which collapsed into administration last week.

It was understood that administrators had set a deadline of Wednesday for any potential suitors to present their offers.

Plus500 increased 2.86% as it kicked off its $60m share buyback programme, announced alongside results earlier in the week.

On the downside, the mining sector bore the brunt of the risk-off sentiment, as Fresnillo, Antofagasta, Endeavour Mining, and Rio Tinto declined 2.09%, 2.1%, 2.14%, and 0.56%, respectively.

Manufacturer Essentra reversed earlier gains to finish down 3.35%, after it reported a 54% surge in its first-half results, despite dwindling sales figures.

Infrastructure giant Balfour Beatty tumbled 10.67% after the firm remained positive on its full-year outlook, but revealed that its order book value decreased by £1bn over the last six months, settling at £16.4bn.

Finally, the property and real estate sector wasn't spared amid persistent fears that the Bank of England could hike interest rates further.

Barratt Developments and Rightmove were both in the red, recording losses of 1.74% and 2.4% respectively.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,356.88 -0.44%
FTSE 250 (MCX) 18,580.78 -0.42%
techMARK (TASX) 4,272.00 -0.55%

FTSE 100 - Risers

Admiral Group (ADM) 2,358.00p 7.23%
JD Sports Fashion (JD.) 153.65p 2.84%
B&M European Value Retail S.A. (DI) (BME) 574.80p 1.70%
Ocado Group (OCDO) 812.40p 1.63%
3i Group (III) 1,940.00p 1.49%
Associated British Foods (ABF) 1,991.00p 1.19%
Spirax-Sarco Engineering (SPX) 10,280.00p 1.18%
Barclays (BARC) 145.00p 1.02%
Unite Group (UTG) 936.50p 0.97%
Centrica (CNA) 143.30p 0.92%

FTSE 100 - Fallers

NATWEST GROUP (NWG) 226.40p -3.08%
Rightmove (RMV) 559.00p -2.61%
Fresnillo (FRES) 513.60p -2.36%
Antofagasta (ANTO) 1,420.00p -2.24%
Endeavour Mining (EDV) 1,600.00p -2.14%
Abrdn (ABDN) 173.95p -1.94%
Flutter Entertainment (CDI) (FLTR) 13,750.00p -1.93%
Land Securities Group (LAND) 602.40p -1.89%
Legal & General Group (LGEN) 222.00p -1.81%
Haleon (HLN) 325.75p -1.76%

FTSE 250 - Risers

Direct Line Insurance Group (DLG) 161.90p 7.11%
Marks & Spencer Group (MKS) 231.60p 4.51%
Close Brothers Group (CBG) 840.50p 3.45%
Plus500 Ltd (DI) (PLUS) 1,473.00p 2.86%
NCC Group (NCC) 98.20p 1.97%
Tritax Big Box Reit (BBOX) 142.60p 1.78%
Dr. Martens (DOCS) 157.50p 1.68%
RHI Magnesita N.V. (DI) (RHIM) 2,972.00p 1.43%
RIT Capital Partners (RCP) 1,882.00p 1.40%
Hill and Smith (HILS) 1,810.00p 1.23%

FTSE 250 - Fallers

Balfour Beatty (BBY) 310.00p -10.61%
Synthomer (SYNT) 73.00p -6.83%
W.A.G Payment Solutions (WPS) 86.00p -5.96%
Digital 9 Infrastructure NPV (DGI9) 53.20p -3.97%
Capita (CPI) 19.15p -3.43%
Essentra (ESNT) 150.40p -3.09%
HGCapital Trust (HGT) 387.00p -3.01%
Vistry Group (VTY) 746.00p -2.74%
Trainline (TRN) 240.00p -2.44%
C&C Group (CDI) (CCR) 137.60p -2.41%