London close: Stocks finish lower on renewed growth concerns

London stocks were still in negative territory at the close on Wednesday, after data showed that UK inflation hit a fresh 40-year high in May as energy and food prices continued to surge.

The FTSE 100 ended the session down 0.88% at 7,089.22, and the FTSE 250 was 0.31% weaker at 18,891.22.

Sterling was in a mixed state, last trading 0.02% stronger on the dollar at $1.2280, while it weakened 0.47% against the euro to change hands at €1.1601.

“Worries about the health of the global economy have resurfaced and that has triggered a wave of selling across the board as stocks, metals and oils are deep in the red,” said Equiti Capital market analyst David Madden.

“Last week, Fed boss Jerome Powell cautioned that the risk of a recession in the US has increased, and those worries are weighing on sentiment today.

“Economies around the world are experiencing lower growth and to make matters worse, inflation and interest rates are on the rise.”

Madden said there was a “creeping feeling” that things were going to get worse before they improved, explaining the slump in stocks.

“Germany’s DAX is close to retesting the three-month low it posted last week.

“The FTSE 100 is down as it is a broad-based sell-off, with losses seen most notably in oil companies.

“Banks, retailers, and house builders are down on the session too.”

In economic news, UK inflation rose to a fresh 40-year high in May as energy and food prices continued to surge.

According to the figures released by the Office for National Statistics, consumer price inflation ticked up to 9.1% from 9% in April, in line with analysts' estimates and hitting the highest level since March 1982.

The ONS said rising prices for food and non-alcoholic beverages, compared with falls a year ago, resulted in the largest upward contribution to the change in both the CPIH and CPI 12-month inflation rates between April and May 2022.

Its data showed that food price inflation rose from 6.7% in April to a 13-year high of 8.5% in May.

“Though still at historically high levels, the annual inflation rate was little changed in May,” said ONS chief economist Grant Fitzner.

“Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year and a drop in often fluctuating computer games prices.

“The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record.”

On a monthly basis, consumer price inflation increased 0.7% in May, compared with a rise of 0.6% in May 2021.

After lifting interest rates to a 13-year high of 1.25% last week, the Bank of England warned that inflation could hit 11% this autumn - up from its previous forecast of 10%.

“The latest temperature check of the UK economy shows the mercury rising again, with no end yet in sight to feverish price rises,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“May’s rise in inflation was smaller compared to the jump we saw in April, so although the pace of rate rises looks set to continue, the Bank may hold off from bringing in a larger hike of 0.5% for the time being.”

ONS data also showed UK house prices growing 12.4% in the year to April, to reach a new record high.

That was up from 9.7% growth in March, and meant the average UK house price in April stood at £281,000, up £31,000 on the same time a year earlier.

It also marked the second-largest annual rise since 2006.

In England, average house prices increased 11.9%, while Wales saw a 16.2% jump, and Scotland and Northern Ireland saw increases of 16.2% and 10.4%, respectively.

London remained the region with the lowest annual growth at 7.9%.

“While annual growth nudged up again in April, this was mainly due to falls seen at this time last year from changes in the previous stamp duty holiday,” said ONS house prices statistician Chris Jenkins.

“Wales and Scotland saw the highest growth with London, again, growing the slowest.

“Rental prices continued to grow steadily overall. However, while still lagging other nations and regions, growth in London continues to pick up.”

Across the pond, the head of the US central bank said the Federal Reserve was "strongly committed" to reining in inflation and believed that further rate increases would be "appropriate" and that policy decisions would be made meeting by meeting.

The central bank’s chair Jerome Powell, in remarks prepared for a speech before the Senate Committee on Banking, Housing and Urban Affairs, said that the Fed would strive not to add uncertainty at what was already an "extraordinarily challenging and uncertain time".

He stressed that policymakers were aware of the hardship that inflation was causing.

“We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses," Powell said.

“It is essential that we bring inflation down if we are to have a sustained period of strong labour market conditions that benefit all.”

On London’s equity markets, miners were on the back foot as copper prices fell, with Glencore down 6.89%, Anglo American off 4.95% and Antofagasta 6.43% weaker.

BP and Shell gushed a respective 3.05% and 3.49% lower as oil prices tanked, while software company Micro Focus International tumbled 16.22% after its interim results.

Ocado slid 4.18% after an article in the Telegraph suggested that the "pricey" online supermarket could be "crushed" by the likes of the limited assortment discounters - the privately-held Aldi and Lidl - as the cost-of-living crisis intensified.

Housebuilder Berkeley Group lost 3.06% even as it posted a jump in full-year profits and said underlying reservations were slightly ahead of pre-pandemic levels.

“An increase to profits forecasts for the next three years and strong hints of even greater cash returns to shareholders are failing to move shares in high-end housebuilder Berkeley,” said AJ Bell investment director Russ Mould.

“Investors are focusing instead on rising interest rates, falling consumer confidence and fears of a recession, especially as acquisitions, dividends and buybacks are whittling down the FTSE 100 firm’s net cash pile.”

On the upside, retailer JD Sports Fashion rallied 6.6% after it said annual profits more than doubled.

NatWest Group rose 3.03% after the UK government said it was extending a plan to sell more of its £11.3bn stake in the bank for another year.

It also benefited from an upgrade to ‘buy’ at Jefferies.

Royal Mail managed to rise 0.04%, having fallen earlier on the news that staff were balloting for industrial action over a 2% pay rise offer.

More than 115,000 postal workers would be balloted in the coming weeks on whether to take industrial action.

Voting papers were set to be sent out on 28 June, with the result announced on 19 July.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,089.22 -0.88%
FTSE 250 (MCX) 18,891.22 -0.31%
techMARK (TASX) 4,228.19 -0.38%

FTSE 100 - Risers

JD Sports Fashion (JD.) 113.85p 6.60%
Centrica (CNA) 83.54p 4.58%
Rentokil Initial (RTO) 460.00p 3.37%
Intertek Group (ITRK) 4,326.00p 3.19%
NATWEST GROUP PLC ORD 100P (NWG) 228.00p 3.03%
Admiral Group (ADM) 2,162.00p 2.81%
London Stock Exchange Group (LSEG) 7,340.00p 2.40%
Dechra Pharmaceuticals (DPH) 3,240.00p 2.02%
Avast (AVST) 517.80p 1.81%
AstraZeneca (AZN) 10,310.00p 1.74%

FTSE 100 - Fallers

Glencore (GLEN) 449.35p -6.89%
Antofagasta (ANTO) 1,244.00p -6.43%
Rolls-Royce Holdings (RR.) 86.11p -5.89%
Anglo American (AAL) 3,207.00p -4.95%
Prudential (PRU) 933.60p -4.34%
Ocado Group (OCDO) 819.80p -4.18%
Standard Chartered (STAN) 591.40p -3.90%
Shell (SHEL) 2,076.00p -3.49%
Berkeley Group Holdings (The) (BKG) 3,676.00p -3.06%
BP (BP.) 383.30p -3.05%

FTSE 250 - Risers

FirstGroup (FGP) 139.50p 5.36%
Drax Group (DRX) 671.00p 5.17%
Trainline (TRN) 316.70p 4.52%
Network International Holdings (NETW) 190.60p 3.93%
Kainos Group (KNOS) 1,054.00p 3.64%
Moonpig Group (MOON) 229.60p 3.53%
Molten Ventures (GROW) 437.80p 3.50%
Future (FUTR) 1,685.00p 3.36%
Virgin Money UK (VMUK) 130.50p 3.08%
Dr. Martens (DOCS) 253.80p 2.91%

FTSE 250 - Fallers

Micro Focus International (MCRO) 299.50p -16.22%
Vesuvius (VSVS) 308.20p -7.95%
Polymetal International (POLY) 177.05p -7.43%
RHI Magnesita N.V. (DI) (RHIM) 2,098.00p -6.26%
HGCapital Trust (HGT) 345.50p -4.83%
BlackRock World Mining Trust (BRWM) 611.00p -4.68%
NCC Group (NCC) 195.80p -4.49%
Petrofac Ltd. (PFC) 126.40p -4.24%
Apax Global Alpha Limited (APAX) 181.60p -4.12%
Morgan Advanced Materials (MGAM) 280.00p -3.95%