London close: Stocks mixed as investors digest US inflation data

London’s stock markets ended with a mixed performance on Wednesday, with slight fluctuations as investors grappled with the latest economic data from both the UK and the US.

The FTSE 100 edged down 0.02% to settle at 7,525.99, while the FTSE 250 managed a modest rise, growing 0.1% to close at 18,561.50.

On the currency front, sterling was last up 0.06% on the dollar, trading at $1.2497, while it strengthened 0.13% against the euro to change hands at €1.1631.

“While US prices have risen at a faster pace over the last month, stocks have nonetheless taken comfort from the drop in annual core inflation,” said IG chief market analyst Chris Beauchamp.

“There was plenty of nervousness ahead of the report, with stocks in fragile form, but a more confident tone has emerged, at least in the US.

“European stocks remain in negative territory as they await tomorrow’s ECB decision, with a rate hike back on the cards after Tuesday’s late-night appearance from the fabled ECB ‘stories’.”

UK economy stumbles, eurozone production drops, and US cost of living surges

In economic news, the UK landscape showed signs of slowing down in July, influenced by a series of strikes and inclement weather conditions.

Data from the Office for National Statistics revealed that GDP contracted 0.5% in July, following an equal growth percentage in the previous month.

That downturn surpassed market predictions, which had anticipated a 0.2% decline.

While the services sector saw a decline of 0.5% after modest growth in June, production output wasn't spared either, dipping by 0.7% post a significant 1.8% surge in June.

Furthermore, the construction sector reported a decrease in output by 0.5%, a downturn from its 1.6% growth in June.

“In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather,” said ONS director of economic statistics Darren Morgan.

“Manufacturing also fell back following its rebound from the effect of May's extra bank holiday.

“A busy schedule of sporting events and increased theme park visits provided a slight boost.”

Across the channel, the eurozone saw a more pronounced dip in industrial production in July than experts had foreseen.

Eurostat's latest release highlighted a 1.1% drop on a seasonally adjusted scale, a significant downturn from the revised 0.4% growth in June.

That decline mirrored the broader European Union scenario where industrial production fell by the same rate after a 0.4% rise the previous month.

Taking a year-on-year view, the industrial production decline rates stood at 2.2% for the eurozone and 2.4% for the wider EU bloc.

“Eurozone industrial production fell at the start of the third quarter,” said Melanie Debono, senior Europe economist at Pantheon Macroeconomics.

“Assuming the headline figure is correct, the carry-over - if output held steady in both August and September at July’s level - suggests industrial production will have fallen by 0.8% this quarter, marking the fourth straight quarterly decline.”

Across the Atlantic, the US recorded a slight acceleration in its inflation rate, primarily propelled by escalating petrol prices and auto insurance costs.

Figures from the Department of Labor showed the consumer price index (CPI) growing at 0.6% in August, slightly surpassing the economist forecast of 0.5%.

On an annual scale, the rise was marked at 3.7%, slightly outpacing the expected 3.6% increment.

Gasoline prices showed a significant jump of 10.6% when compared to the prior month.

Core CPI, which excludes variables like energy and food, progressed by 0.3% in August, with rent contributing 0.17 percentage points to this growth, surpassing the general consensus of 0.2%.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said headline CPI would dip below 3.0% year-on-year early in 2024.

“Today’s core number raises the odds of a rate hike next week, but not by much; we expect the Fed to remain on hold, but to signal willingness to hike again depending on the data,” he added.

“Our take on the data over the period before the November meeting suggests the Fed won’t hike then, either. We think the chance of another hike is about 25%.”

Redrow jumps despite profit dip, HSBC and Barclays rise, BP faces setback

On London’s equity markets, Redrow rose 6.45% despite it announcing a substantial decrease in its weekly summer sales.

The slump, nearly halving, was attributed to the escalating mortgage costs in a market described as “challenging”.

It also reported a dip in its full-year profits.

However, Victoria Scholar, head of investment at Interactive Investor, provided a silver lining in noting that the full-year underlying pre-tax profit still exceeded what most analysts had predicted.

Redrow’s sector peers also saw growth, as Persimmon rose 1.73%, Berkeley Group climbed 2.47%, Taylor Wimpey was up by 2.04%, Barratt Developments increased 2.29%, Vistry Group ascended 1.93%, and Bellway added 3.46%.

In the banking sector, both HSBC and Barclays enjoyed positive momentum, rising by 2.43% and 2.5% respectively.

Insurance heavyweight Aviva saw a spike of 4.52%, after it agreed to divest its 25.9% share in Singapore Life Holdings (Singlife) and two debt instruments.

The stake was sold to Sumitomo Life for £800m in cash.

Engineering firm Renishaw advanced 2.76% even though it postponed its full-year results announcement from 14 to 19 September.

The company, however, reiterated its guidance, predicting revenues of £688.6m, a slight increase from £671.1m in the prior year.

They also forecast an adjusted pre-tax profit of £141m, a decrease from £163.7m in the year prior, aligning with its earlier statements.

On the downside, energy conglomerate BP was off 2.74% after it revealed late on Tuesday that its chief executive Bernard Looney had stepped down, due to his failure to fully disclose details of previous relationships with colleagues.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,525.99 -0.02%
FTSE 250 (MCX) 18,561.50 0.10%
techMARK (TASX) 4,339.32 0.00%

FTSE 100 - Risers

Aviva (AV.) 393.50p 4.57%
Melrose Industries (MRO) 501.20p 4.57%
Persimmon (PSN) 1,064.00p 4.01%
Taylor Wimpey (TW.) 118.00p 2.48%
Berkeley Group Holdings (The) (BKG) 4,100.00p 2.47%
Barclays (BARC) 157.24p 2.38%
HSBC Holdings (HSBA) 611.00p 2.29%
Barratt Developments (BDEV) 446.60p 2.24%
Smith (DS) (SMDS) 290.40p 2.04%
Vodafone Group (VOD) 78.83p 1.87%

FTSE 100 - Fallers

Ocado Group (OCDO) 769.00p -4.07%
International Consolidated Airlines Group SA (CDI) (IAG) 153.80p -2.87%
BP (BP.) 508.20p -2.79%
JD Sports Fashion (JD.) 137.00p -2.46%
Halma (HLMA) 2,115.00p -2.26%
B&M European Value Retail S.A. (DI) (BME) 567.40p -2.00%
Croda International (CRDA) 4,937.00p -1.85%
Coca-Cola HBC AG (CDI) (CCH) 2,247.00p -1.45%
Next (NXT) 7,178.00p -1.37%
Flutter Entertainment (CDI) (FLTR) 13,995.00p -1.27%

FTSE 250 - Risers

Redrow (RDW) 502.00p 6.13%
Ithaca Energy (ITH) 162.00p 5.61%
Renishaw (RSW) 3,750.00p 4.11%
Bellway (BWY) 2,214.00p 3.46%
Grainger (GRI) 241.40p 2.90%
Vistry Group (VTY) 930.50p 2.82%
OSB Group (OSB) 330.80p 2.73%
Direct Line Insurance Group (DLG) 179.45p 2.51%
Primary Health Properties (PHP) 96.35p 2.28%
Wizz Air Holdings (WIZZ) 2,016.00p 2.26%

FTSE 250 - Fallers

Watches of Switzerland Group (WOSG) 594.00p -3.96%
Helios Towers (HTWS) 87.80p -3.68%
Bridgepoint Group (Reg S) (BPT) 193.30p -2.86%
Wood Group (John) (WG.) 157.60p -2.84%
Bodycote (BOY) 669.50p -2.76%
NCC Group (NCC) 92.10p -2.75%
Bakkavor Group (BAKK) 99.80p -2.63%
North Atlantic Smaller Companies Inv Trust (NAS) 3,550.00p -2.51%
Syncona Limited NPV (SYNC) 120.40p -2.43%
Kainos Group (KNOS) 1,217.00p -2.25%