London close: Stocks mixed as UK inflation holds steady

London stocks ended mixed on Wednesday as the latest inflation data came in slightly higher than anticipated, casting doubt on a potential interest rate cut in August.

The FTSE 100 index gained 0.28%, closing at 8,187.46 points, while the FTSE 250 index fell by 0.57% to 21,093.34 points.

In currency markets, sterling was last up 0.25% on the dollar to trade at $1.3007, while it edged down 0.06% against the euro, changing hands at €1.1896.

“Hopes of an August rate cut have dimmed, and while this initially put the FTSE 100 on the back foot this morning, the index has managed to get back into positive territory,” said IG chief market analyst Chris Beauchamp.

“UK investors are digesting the impact of the King’s Speech, which has boosted expectations of a more vibrant British economy.

“The pound surged through the $1.30 barrier today following the inflation reading, and is well on course to reach last July’s highs at this rate.”

Beauchamp said that, while the Dow and small-cap gains were just a shadow of recent surges, tech stocks remained firmly out of favour, partly thanks to the selloff in TSMC overnight, as well as on some pre-earnings nerves.

“The Magnificent Seven are widely expected to give way to the ‘other 493’ this time around, as investors finally lose some of their enthusiasm for the big names.

“The Fed has been keen to pour cold water on overeager expectations on rate cut; the NY Fed’s Williams being out and about today saying that July was too early for a rate cut, but he left the door firmly open for a September move.”

UK inflation holds steady in June

In economic news, UK inflation held steady in June, matching the Bank of England's 2% target, according to the Office for National Statistics (ONS).

That stability was largely attributed to significant price increases in restaurants and hotels, despite a decline in second-hand car costs and widespread sales lowering clothing and footwear prices.

The core consumer price index (CPI), excluding volatile items like energy and food, remained unchanged at 3.5%.

At the same time, the consumer prices index including occupiers' housing costs (CPIPH) also stayed steady at 2.8%.

The Bank of England, with rates currently at a 16-year high of 5.25%, was expected to consider a rate cut later this summer, though the exact timing remains uncertain due to persistent high services sector CPI.

“A fall to 1.9% had been predicted but didn’t materialise, putting the decision about a potential cut on 1 August finely in the balance; the odds are now around 50:50,” said Laura Suter, director of personal finance at AJ Bell.

“The other thorn in the BoE’s side is services inflation.

“This sticky element of inflation is a big concern to the Bank and even a small drop in the right direction would have given more confidence that now is the right time for interest rate cuts.”

The UK housing market meanwhile saw a sharp acceleration in house price increases in May, with the average home price rising 2.2% year-on-year to £285,000.

That marked a rebound from the 1.3% growth in April and continues a trend of rising prices after eight months of decline.

England's average house price rose to £302,000, Wales to £216,000, and Scotland to £191,000.

Rental prices also remained high, with an 8.6% year-on-year increase in June, close to the multi-year high of 9.2% recorded in March.

The highest rent inflation was observed in London at 9.7%, while the North East saw the lowest at 5.9%.

On the continent, inflation in the eurozone decreased to 2.5% in June from 2.6% in May, consistent with earlier estimates.

That was a significant drop from the 5.5% rate a year ago.

Across the broader European Union, inflation fell to 2.6% in June, down from 2.7% in May, compared to 6.4% in the previous year

In the United States, industrial production rose by 0.6% in June, driven by a substantial increase in utility output, which surged by 2.8%.

Manufacturing and mining outputs also saw gains of 0.4% and 0.3%, respectively.

That exceeded economists' expectations of a 0.3% rise and included upward revisions for previous months.

Meanwhile, US homebuilding activity grew by 3.0% in June, with an annual rate of 1.353 million housing starts.

However, single-family home starts fell by 2.2%, contrasting with a 22% surge in multi-family unit starts.

HSBC manages gains, Antofagasta tumbles

On London’s equity markets, HSBC Holdings saw a modest increase of 0.41% following the announcement that George Elhedery, the current finance chief, would be promoted to chief executive starting in September.

Elhedery would replace Noel Quinn, the outgoing CEO.

Severn Trent and United Utilities Group both experienced gains, rising by 1.9% and 1.65% respectively.

That followed a dip on Tuesday after Ofwat announced an expanded investigation into water companies' management of wastewater treatment works.

Indivior shares rallied by 2.94% after a recent profit warning and a slowdown in sales of its leading opioid addiction treatment.

Additionally, the company announced it would discontinue sales of its schizophrenia drug Perseris.

Despite the rebound, the stock remained significantly below its pre-announcement level of 1,181p.

On the downside, Antofagasta experienced a sharp decline of 6.11% after warning that its full-year production would likely hit the lower end of its forecasted range of 670,000 to 710,000 tonnes.

Legal & General Group shares dropped by 1.53% following a downgrade by RBC Capital Markets from ‘outperform’ to ‘sector perform’.

Animal genetics firm Genus saw its shares plummet by 10.61%.

The company announced that its profits for the year would be lower than expected due to ongoing market challenges in China and Brazil.

Despite reporting a 34% increase in underlying profits for the year ended March 31, Babcock International Group's shares fell by 3.53%.

The decline came as the company revealed a £90m loss on a ship-building contract with the Royal Navy, overshadowing its profit surge.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,187.46 0.28%
FTSE 250 (MCX) 21,093.34 -0.57%
techMARK (TASX) 4,800.53 -0.61%

FTSE 100 - Risers

Burberry Group (BRBY) 735.60p 4.40%
Smith & Nephew (SN.) 1,089.00p 2.49%
BT Group (BT.A) 140.90p 2.36%
Severn Trent (SVT) 2,533.00p 1.90%
Reckitt Benckiser Group (RKT) 4,359.00p 1.89%
GSK (GSK) 1,528.50p 1.83%
Vodafone Group (VOD) 70.64p 1.82%
Imperial Brands (IMB) 2,079.00p 1.66%
United Utilities Group (UU.) 1,013.50p 1.65%
Coca-Cola HBC AG (CDI) (CCH) 2,732.00p 1.56%

FTSE 100 - Fallers

Antofagasta (ANTO) 1,998.00p -6.11%
Intermediate Capital Group (ICG) 2,106.00p -4.71%
Melrose Industries (MRO) 567.00p -3.31%
Scottish Mortgage Inv Trust (SMT) 864.60p -3.20%
Frasers Group (FRAS) 821.50p -2.67%
Rolls-Royce Holdings (RR.) 447.20p -2.55%
Halma (HLMA) 2,626.00p -2.34%
Intertek Group (ITRK) 4,684.00p -2.10%
Weir Group (WEIR) 1,944.00p -1.92%
Sage Group (SGE) 1,040.00p -1.84%

FTSE 250 - Risers

Indivior (INDV) 825.50p 6.13%
Pennon Group (PNN) 642.50p 4.11%
Diversified Energy Company (DEC) 1,290.00p 3.37%
Watches of Switzerland Group (WOSG) 402.60p 2.60%
Abrdn (ABDN) 166.80p 2.49%
Domino's Pizza Group (DOM) 328.20p 2.43%
PZ Cussons (PZC) 104.80p 2.33%
Ithaca Energy (ITH) 120.30p 1.92%
Wetherspoon (J.D.) (JDW) 770.00p 1.78%
Elementis (ELM) 147.20p 1.66%

FTSE 250 - Fallers

Genus (GNS) 1,736.00p -10.82%
Allianz Technology Trust (ATT) 382.00p -5.09%
Polar Capital Technology Trust (PCT) 3,235.00p -4.85%
Ibstock (IBST) 187.40p -4.49%
Plus500 Ltd (DI) (PLUS) 2,178.00p -4.05%
Babcock International Group (BAB) 517.50p -3.90%
Marshalls (MSLH) 346.50p -3.21%
Genuit Group (GEN) 482.50p -3.03%
Discoverie Group (DSCV) 732.00p -2.79%
Computacenter (CCC) 2,762.00p -2.54%