London close: Stocks fall as US inflation rockets past forecasts

London stocks closed below the line on Wednesday, as investors digested surging inflation figures out of the US, after the latest UK economic data earlier surprised to the upside.

The FTSE 100 ended the session down 0.74% at 7,156.37, and the FTSE 250 was off 0.76% at 18,711.36.

Sterling was in a mixed state, last trading up 0.4% on the dollar at $1.1937, while it weakened 0.17% against the euro to change hands at €1.1825.

“The ongoing theme of stock weakness and dollar dominance continue to play out in the wake of the latest US inflation data,” said IG senior market analyst Joshua Mahony.

“While markets had expected to see prices increase for June, the actual figure of 9.1% represents a whopping 40-year high that does little to instil confidence that things are about to turn around.

“With headline CPI jumping by 1.3% over the course of the month alone, it is perhaps no surprise to see market pricing around an oversized 100 basis point rate hike gather traction.”

Mahony said that ordinarily, such a hike would be unheard of, but the Bank of Canada implemented a 100-basis point rate rise of their own this afternoon.

“Higher rates, sharp increases in costs, and lagging wage growth all amount to an environment that will be tough for businesses and consumers alike.

“Quite how long this period of suffering will last is the million-dollar question that will continue to hold back investment decisions.”

In economic news, US inflation surged to 9.1% in June, ahead of expectations for a print of 8.8% to the highest level seen since November 1981.

According to the Bureau of Labor Statistics, June's reading, up from 8.6% in May, came as energy prices rose 41.6% last month, the most since April 1980.

Food costs surged 10.4%, the most since February 1981, with food at home costs jumping 12.2%, the largest 12-month increase since April 1979.

Increases were also seen in the cost of shelter, up 5.6%, household furnishings and operations, up 9.5%, new vehicles, up 11.4%, used cars and trucks, up 1.7%, and airline fares, up 34.1%.

At the core level, which excludes food and energy, inflation increased 5.9% - slightly below the 6% clip in May but above forecasts for a reading of 5.7%.

On home shores, official data showed the UK economy growing at a faster-than-expected pace in May.

According to the Office for National Statistics, GDP grew by 0.5% in May, following a decline of 0.2% in April, which was revised up from an earlier estimate for a 0.3% fall.

Analysts had forecast a rise of just 0.1% for May.

In the three months to May, GDP rose by 0.4%, and by 3.5% in the year to May.

“May’s GDP data have not changed our expectations for a contraction in the second quarter,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics.

“We estimate that the additional bank holiday for the Queen’s Jubilee, which will be treated as a special event by the ONS and thus will depress the seasonally adjusted data, will cause GDP to fall by around 1.5% month-to-month in June.

“In addition, weak consumer confidence suggests that people probably didn’t borrow enough, or cut their savings by enough, to maintain their real spending while their real incomes dropped.”

Elsewhere, UK imports continue to grow faster than exports, pushing the trade deficit wider.

According to the Office for National Statistics, imports of goods rose by £20.2bn or 14.6% in the three months to May 2022, while exports increased by £10.7bn or 12.6%.

As a result, the trade in goods deficit, excluding volatile precious metals, widened by £9.5bn to £63.1bn in the three months to May 2022 compared to the previous three months.

Central banks were in focus overnight, after policymakers in both South Korea and New Zealand sated market expectations with 50-basis point hikes.

The Bank of Korea confirmed its highest rate rise since its current framework began in 1999, taking its benchmark rate to 2.25%.

Further south, the Reserve Bank of New Zealand delivered its sixth consecutive hike to take the official cash rate to 2.5%, while sticking to its guns with regard to plans for further rises.

In equities, shipping services group Clarkson closed up 9.14% after it said it now expected to report unaudited underlying pre-tax profits of no less than £42.0m for the six months ended 30 June.

It added that its first-half performance had been "strong" across all divisions, with its broking unit performing "particularly well".

Precious metals miners Fresnillo and Endeavour Mining were ahead a respective 3.85% and 4.12%, catching a dip in the dollar and resulting small gains in gold and silver prices following the release of the June consumer price report.

On the downside, property developer Countryside Partnerships was down 2.78%, after revealing that chairman John Martin had decided to resign from all his roles at the company with immediate effect.

Countryside said senior independent director Douglas Hurt was to take over as chairman, while Amanda Burton will replace Hurt, effective immediately.

The FTSE 250-listed firm also reiterated its full-year financial adjusted operating profit guidance for the twelve months ending 30 September.

Also falling were commercial broadcaster ITV and telecoms behemoth BT Group, by 1.55% and 1.65% respectively, after the competition watchdog launched a probe into potential cartel-like behaviour by a number of British sports broadcasters.

The Competition and Markets Authority said it believed there were "reasonable grounds" to suspect that ITV, as well as BT, Comcast-owned Sky, and Endeavour Group division IMG Media, may have broken competition rules with the purchase of freelance services in the UK.

“The investigation relates to the purchase by such companies of freelance services which support the production and broadcasting of sports content in the UK," said the CMA.

Elsewhere, technology services firm Computacenter was off 1.77% after announcing the acquisition of US value-added reseller Business IT Source for an undisclosed sum.

Computacenter said that BITS' existing leadership team would stay on to run the business as a separate operating unit within its US division, as part of an effort to maximise its growth opportunity.

JD Wetherspoon tumbled 8.33% after it said sales in the first 11 weeks of its fourth quarter were 0.4% below the same pre-pandemic period in 2019 - an improvement compared to the prior quarter, when sales were down 4%.

The FTSE 250 pub operator said sales of spirits were up 4.4%, cocktails up 18.6%, food up 2.1%, hotel rooms up 8.4%, and fruit machines ahead 16.6%, while draught ales, lagers and ciders - historically the largest contributors to pub sales - were 8% below 2019.

British Airways and Iberia owner IAG descended 4.02%, a day after Heathrow airport capped the number of travellers per day to 100,000 due to staff shortages, forcing the cancellation of 1,000 summer flights.

Low-cost carriers were also in the red, with easyJet down 3.63% and Wizz Air 4.81% lower.

Reporting by Josh White at Sharecast.com. Additional reporting by Alexander Bueso, Iain Gilbert and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 7,156.37 -0.74%
FTSE 250 (MCX) 18,711.36 -0.76%
techMARK (TASX) 4,285.23 -0.97%

FTSE 100 - Risers

Fresnillo (FRES) 684.60p 3.85%
Endeavour Mining (EDV) 1,669.00p 1.66%
SEGRO (SGRO) 1,031.50p 1.48%
Land Securities Group (LAND) 671.20p 1.33%
Harbour Energy (HBR) 328.00p 1.17%
Diageo (DGE) 3,621.50p 0.67%
British Land Company (BLND) 457.40p 0.64%
United Utilities Group (UU.) 1,047.50p 0.58%
Bunzl (BNZL) 2,903.00p 0.55%
Centrica (CNA) 84.36p 0.48%

FTSE 100 - Fallers

Abrdn (ABDN) 154.15p -5.02%
Mondi (MNDI) 1,427.00p -4.20%
International Consolidated Airlines Group SA (CDI) (IAG) 105.98p -4.02%
Smith (DS) (SMDS) 277.10p -3.62%
GSK (GSK) 1,695.00p -2.73%
Auto Trader Group (AUTO) 570.80p -2.59%
Ocado Group (OCDO) 813.00p -2.24%
Hikma Pharmaceuticals (HIK) 1,670.50p -2.14%
Ashtead Group (AHT) 3,722.00p -2.13%
Prudential (PRU) 987.60p -2.12%

FTSE 250 - Risers

Johnson Matthey (JMAT) 2,100.00p 11.41%
Clarkson (CKN) 3,225.00p 9.14%
Darktrace (DARK) 336.80p 4.56%
Trainline (TRN) 365.90p 3.07%
Drax Group (DRX) 712.50p 2.52%
Tyman (TYMN) 254.50p 2.21%
Pagegroup (PAGE) 438.60p 2.00%
Balanced Commercial Property Trust Limited (BCPT) 112.60p 1.81%
Energean (ENOG) 1,033.00p 1.77%
Safestore Holdings (SAFE) 1,075.00p 1.61%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 577.50p -8.33%
Aston Martin Lagonda Global Holdings (AML) 402.20p -6.57%
Essentra (ESNT) 235.00p -5.81%
Mitchells & Butlers (MAB) 170.90p -5.58%
Wizz Air Holdings (WIZZ) 1,782.50p -4.81%
Balfour Beatty (BBY) 257.20p -4.10%
Playtech (PTEC) 516.00p -4.09%
Provident Financial (PFG) 187.70p -3.89%
4Imprint Group (FOUR) 2,365.00p -3.86%
HGCapital Trust (HGT) 312.50p -3.85%