London close: Stocks fall as US inflation tops expectations

London markets ended the trading day in negative territory on Tuesday, influenced by concerns over higher inflation figures from the United States and a deceleration in wage growth within the UK.

The FTSE 100 closed down 0.81% at 7,512.28 points, while the FTSE 250 fell 1.46% to settle at 18,923.83 points.

In currency markets, sterling was last down 0.21% on the dollar to trade at $1.2602, while it managed a modest uptick against the euro, gaining 0.33% to change hands at €1.1762.

“January consumer price inflation falling less than expected was enough of a catalyst to cut the equity rally short, push yields and the US dollar to two-month highs,” said IG senior market analyst Axel Rudolph.

“Hopes for a Fed March rate cut have all but disappeared with the market now pricing in a 53% probability of a first cut being seen in June.”

Rudolph said the Brent crude oil price was on track for its seventh straight day of gains, albeit at a slower pace, as investors mulled over the situation in the Middle East and supply concerns.

“US natural gas prices continue to slide, though, and hit their lowest level since July 2020 amid ample production levels and subdued demand due to more clement weather.

“The higher-than-expected US CPI reading provoked a sharp decline in the gold price with it now trading in two-month lows below the psychological $2,000 per troy ounce mark.”

Unemployment rate decreases in UK, US inflation remains hot

In economic news, the Office for National Statistics reported that the unemployment rate for individuals aged 16 and over decreased to 3.8% in the three months to December, down from November's 4.2% and surpassing expectations for 4.0%.

However, the economic inactivity rate rose to 21.9%, primarily driven by the number of long-term sick individuals, which remained notably high.

Claimant counts for January increased by 14,100 on a monthly basis and 61,200 on a yearly basis, totalling 1.579 million.

Despite that, the employment rate stood at 75.0%.

Vacancies fell by 26,000 in the quarter, marking the 19th consecutive month of decline, although they still surpassed pre-pandemic levels.

Notably, wage growth exceeded forecasts, with average regular earnings for employees, excluding bonuses, rising by 6.2% annually, contrasting with predictions of 6.0%.

Including bonuses, wages grew by 5.8%.

Real-term annual growth for total pay was 1.4%, and 1.8% for regular pay.

However, the ONS expressed caution regarding labour force survey (LFS) estimates due to smaller sample sizes resulting from changes in methodology.

“Official data continue to suggest that the labour market remains tight, though their veracity remains questionable,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“The latest LFS estimates are based on the ONS’ new population projections, but work to boost the response rate remains incomplete.

“Accordingly, the ONS says that the data should be treated with additional caution.”

Tombs said the recent dip in the unemployment rate from its post-Covid peak of 4.3% in July looked “particularly suspect”.

“Many surveys indicate that staff availability for vacancies has improved.”

Meanwhile, inflation in the US surged beyond expectations in January, driven largely by increases in shelter prices.

According to the Bureau of Labor Statistics, the consumer price index rose by 3.1% year-on-year, exceeding the anticipated 2.9% increase and marking a continuation from December's 3.4% rise.

Core CPI, excluding food and energy prices, increased by 0.4% last month and stood at 3.9% higher annually, outpacing forecasts.

Notably, shelter prices, comprising a significant portion of the CPI, rose by 0.6% monthly, contributing substantially to the overall increase, while food prices also saw a 0.4% uptick.

However, energy prices declined by 0.9%, largely due to a 3.3% drop in gas prices.

Finally on data, there was a notable improvement in economic sentiment in Germany according to a closely-monitored survey.

The latest ZEW indicator of economic sentiment rose by 4.7 points in February, reaching 19.9, marking the seventh consecutive month of increase.

However, the indicator reflecting the current economic situation dropped by 4.4 points to -81.7, the lowest since June 2020, at the onset of the pandemic.

Housebuilders fall on jobs data, Aston Martin in the green

On London’s equity markets, housebuilders and property-related firms were in focus, with Persimmon, Barratt Developments, Taylor Wimpey, and Rightmove all suffering losses of between 3.04% and 4.59%.

The downturn followed the release of the UK jobs data, which hinted at the potential for prolonged higher interest rates, thereby impacting sentiment in the property market.

Crest Nicholson, Redrow, Shaftesbury Capital, UK Commercial Property REIT, and Tritax EuroBox also registered declines in response to the aforementioned news, with Crest Nicholson tumbling 6.37%.

Travel firm TUI closed marginally lower despite reporting a positive quarterly underlying profit and affirming its full-year guidance.

The company's underlying earnings before interest and tax for the last quarter were €6 million, marking a significant milestone since the merger of TUI AG and TUI Travel plc in 2014.

Group revenues also saw a notable increase of 15% year-on-year, driven by improved demand and pricing.

On the upside, luxury car maker Aston Martin Lagonda increased 1.13%, attributed to statements from executive chairman Lawrence Stroll regarding efforts to address the company's significant debt.

Stroll confirmed ongoing discussions with bankers to tackle a looming debt pile, which currently stood at $1.4bn.

Pharmaceutical giant GSK managed gains of 0.95% rise following a broker upgrade from Citi, which shifted its rating from 'neutral' to 'buy'.

Citi cited promising data related to GSK's novel treatment for multiple myeloma, Blenrep, as well as other positive indicators.

The bank's upgraded earnings per share forecasts, reflecting peak Blenrep revenues of about £2.5bn, underscored the newfound confidence in GSK's prospects.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,512.28 -0.81%
FTSE 250 (MCX) 18,923.83 -1.46%
techMARK (TASX) 4,340.39 -1.09%

FTSE 100 - Risers

AstraZeneca (AZN) 9,600.00p 1.04%
GSK (GSK) 1,641.80p 0.95%
Centrica (CNA) 135.55p 0.82%
HSBC Holdings (HSBA) 610.50p 0.35%
Anglo American (AAL) 1,756.00p 0.25%
BP (BP.) 479.75p 0.06%
Hikma Pharmaceuticals (HIK) 1,960.00p 0.03%
Severn Trent (SVT) 2,495.00p 0.00%
Unilever (ULVR) 3,992.50p -0.01%
Smith & Nephew (SN.) 1,096.50p -0.14%

FTSE 100 - Fallers

Barratt Developments (BDEV) 466.10p -4.59%
Taylor Wimpey (TW.) 141.15p -4.39%
Fresnillo (FRES) 471.80p -4.38%
Entain (ENT) 973.80p -4.25%
Persimmon (PSN) 1,361.50p -4.05%
Airtel Africa (AAF) 98.70p -3.89%
Scottish Mortgage Inv Trust (SMT) 779.60p -3.45%
Berkeley Group Holdings (The) (BKG) 4,577.00p -3.44%
RS Group (RS1) 765.00p -3.21%
Ocado Group (OCDO) 519.60p -3.20%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,822.00p 1.62%
Auction Technology Group (ATG) 564.00p 1.44%
SDCL Energy Efficiency Income Trust (SEIT) 57.00p 1.24%
PPHE Hotel Group Ltd (PPH) 1,230.00p 1.23%
easyJet (EZJ) 553.40p 1.21%
JPMorgan Japanese Inv Trust (JFJ) 511.00p 0.99%
Diversified Energy Company (DEC) 915.50p 0.88%
Trustpilot Group (TRST) 185.70p 0.70%
Baltic Classifieds Group (BCG) 229.50p 0.66%
Balanced Commercial Property Trust Limited (BCPT) 78.50p 0.64%

FTSE 250 - Fallers

Crest Nicholson Holdings (CRST) 211.60p -6.37%
UK Commercial Property Reit Limited (UKCM) 63.60p -5.50%
Close Brothers Group (CBG) 402.20p -5.45%
Tritax Eurobox (GBP) (EBOX) 47.60p -4.80%
Great Portland Estates (GPE) 366.60p -4.68%
Mobico Group (MCG) 79.25p -4.58%
Redrow (RDW) 654.00p -4.55%
Bridgepoint Group (Reg S) (BPT) 264.60p -4.20%
IWG (IWG) 190.60p -4.12%
Abrdn (ABDN) 158.90p -3.90%