London close: Stocks muted as US inflation comes in cooler

Tuesday saw London's stock markets conclude the day's trading in a reserved state, as investors processed new inflation data out of the United States, which revealed a deceleration in the rate of consumer price growth.

The FTSE 100 ended the session up 0.32% at 7,594.78, while the FTSE 250 was 0.01% 19,188.50.

In currency markets, sterling was last up 0.58% on the dollar to trade at $1.2582, while it strengthened 0.32% against the euro to change hands at €1.1665.

"Following Asia's footsteps, where the Japanese Nikkei 225 reached a 33-year high as China unexpectedly cut its short-term lending rate, European and US indices also saw a strong session," said IG senior market analyst Axel Rudolph.

"Robust UK employment data, improving German economic sentiment and lower-than-expected US CPI headline inflation - at 4% year-on-year - gave equities a boost despite core CPI remaining sticky at 5.3%."

US inflation falls below expectations in May

In economic news, US living costs experienced a slower increase than initially predicted last month, as indicated by fresh data from the Department of Labor.

The consumer price index (CPI) saw monthly growth of 0.1% in May, bringing the annual inflation rate down to 4.0% from the previous 4.9% figure, against a consensus prediction of 4.1%.

Core CPI, which excludes the erratic food and energy sectors, grew by 0.4% over the month.

While food prices experienced a mild rise of 0.2% after two months of stagnation, energy prices fell by 3.6%.

The core level also showed a 0.6% increase in used car and truck prices for a second month, and a 0.6% rise in shelter prices following a 0.4% increase in April.

Excluding food and energy, commodity prices, and medical care commodity prices both rose by 0.6%, while medical care services dropped by 0.1%.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said there was a "good chance" that monthly core CPI gains would soon start printing at 0.2%.

“Given that rents and used vehicles accounted for four-fifth of the increase in the May core, this signals a good chance of 0.2% core prints very soon,” he noted.

On home shores, UK unemployment figures for the quarter through April were slightly lower than expected, and wage growth improved, according to the Office for National Statistics, increasing pressure on the Bank of England to continue with interest rate hikes.

Regular pay, excluding bonuses, rose 7.2% from February to April, an improvement on the 6.8% growth in the previous quarter and surpassing the 6.9% growth expectations.

That marked the highest growth rate observed outside of the Covid pandemic.

Total average pay, including bonuses, increased 6.5% for the quarter, surpassing the previous quarter's 6.1% and confounding expectations that it would remain static.

The unemployment rate stood at 3.8%, slightly increased from the previous quarter's 3.7%, but less than the 3.9% reported last month and lower than the expected 4.0%.

“With another rise in employment, the number of people in work overall has gone past its pre-pandemic level for the first time, setting a new record high, as have total hours worked,” said ONS director of economic statistics Darren Morgan.

“The biggest driver in recent jobs growth, meanwhile, is health and social care, followed by hospitality.

“While there has been another drop in the number of people neither working nor looking for work, which is now falling right across the age range, those outside the jobs market due to long-term sickness continues to rise, to a new record.”

On the continent, German inflation continued to decelerate in May, meeting expectations.

The consumer price index rose by 6.1% year-on-year in May, a slowdown from April's 7.2% surge, according to Destatis.

The harmonised index of consumer prices (HICP), calculated uniformly across all EU nations, showed a year-on-year rise of 6.3%, down from the 7.6% increase in April.

Both the CPI and HICP figures aligned with Destatis's earlier estimates and consensus.

Finally, in response to a faltering economy post-Covid reopening, the People’s Bank of China announced a cut to a key short-term policy rate earlier.

The seven-day reverse repurchase rate was reduced by 10 basis points to 1.9% from 2%, and an injection of CNY 2bn was made via its seven-day repos.

That move marked the central bank's first policy change since August, and followed the reduction in deposit rates by the country's largest banks last week.

Miners rise, housebuilders fall on interest rate influence

On London’s equity markets, among the day's risers were miners Glencore, Rio, Anglo American, and Antofagasta, all witnessing an uptick after China's decision to reduce borrowing costs.

Elsewhere, online trading platform Plus500 rose 6.55% after buying back 7.3 million shares, or around 8.2% of its share capital, from Odey Asset Management at 1,383p per share, totalling £101.3m.

On the downside, housebuilders including Barratt, Taylor Wimpey, Persimmon, Berkeley, Crest Nicholson, Bellway, Vistry, and Redrow, all saw their shares dip on the back of anticipation that further Bank of England rate hikes would increase borrowing costs.

The situation was further aggravated by Bellway's earlier statement that it projected lower output and average prices due to a weaker order book, and uncertainty around the interest rate environment.

Despite Centrica, the owner of British Gas, forecasting its annual earnings to be at the top end of expectations, its shares reversed earlier gains and closed down 0.21%.

The earnings forecast was driven by "significantly higher" profits from its retail division as customers grapple with rising energy prices.

Equipment rental firm Ashtead experienced a marginal dip of 0.04% despite touting a record full-year performance, buoyed by "robust" end markets and strong performance across all regions.

Finally, CMC Markets witnessed a drop of 2.48% following its full-year results, and insurance giant Admiral saw its stocks knocked 5.11% lower by a downgrade to 'sell' at Citi.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,594.78 0.32%
FTSE 250 (MCX) 19,188.50 -0.01%
techMARK (TASX) 4,581.08 0.12%

FTSE 100 - Risers

Glencore (GLEN) 460.00p 5.28%
Antofagasta (ANTO) 1,507.50p 3.54%
Anglo American (AAL) 2,483.00p 2.75%
Rio Tinto (RIO) 5,203.00p 2.66%
Flutter Entertainment (CDI) (FLTR) 15,775.00p 2.50%
Weir Group (WEIR) 1,852.50p 2.21%
Entain (ENT) 1,321.50p 1.85%
Fresnillo (FRES) 660.40p 1.82%
Smiths Group (SMIN) 1,708.00p 1.76%
Endeavour Mining (EDV) 2,068.00p 1.67%

FTSE 100 - Fallers

Admiral Group (ADM) 2,209.00p -5.11%
Persimmon (PSN) 1,167.00p -4.38%
SEGRO (SGRO) 750.60p -3.70%
Taylor Wimpey (TW.) 110.90p -3.23%
Barratt Developments (BDEV) 452.30p -2.73%
Unite Group (UTG) 886.50p -2.58%
British Land Company (BLND) 336.70p -2.09%
BT Group (BT.A) 140.65p -2.09%
Legal & General Group (LGEN) 235.70p -1.96%
Severn Trent (SVT) 2,694.00p -1.89%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,481.00p 6.55%
Carnival (CCL) 1,064.50p 3.90%
Ibstock (IBST) 161.10p 3.80%
Auction Technology Group (ATG) 778.00p 3.46%
Watches of Switzerland Group (WOSG) 669.00p 2.92%
IMI (IMI) 1,668.00p 2.90%
Bodycote (BOY) 640.50p 2.73%
Helios Towers (HTWS) 90.50p 2.72%
Baltic Classifieds Group (BCG) 174.00p 2.72%
Energean (ENOG) 1,103.00p 2.70%

FTSE 250 - Fallers

Ferrexpo (FXPO) 91.85p -4.67%
Crest Nicholson Holdings (CRST) 223.80p -4.36%
Target Healthcare Reit Ltd (THRL) 74.10p -4.14%
Vistry Group (VTY) 746.00p -4.10%
Hammerson (HMSO) 25.68p -3.76%
Assura (AGR) 47.30p -3.59%
UK Commercial Property Reit Limited (UKCM) 53.70p -3.42%
Warehouse Reit (WHR) 88.30p -3.39%
W.A.G Payment Solutions (WPS) 89.40p -3.04%
Balanced Commercial Property Trust Limited (BCPT) 77.10p -3.02%