London close: Stocks slip ahead of much-awaited Fed decision

London's stock markets closed lower on Wednesday, as investors digested the latest UK inflation figures and looked ahead to the US Federal Reserve's policy announcement later in the day.

The FTSE 100 index declined 0.68% to end at 8,253.68 points, while the FTSE 250 saw a decrease of 0.52% to close at 20,835.31 points.

In currency markets, sterling was last up 0.32% on the dollar to trade at $1.3203, while it gained 0.24% against the euro, changing hands at €1.1870.

“The tension is palpable across markets this afternoon, as they stand on the verge of the most unpredictable Fed meeting in recent memory, and one that seems to provide the most potential for volatility in some time,” said IG chief market analyst Chris Beauchamp.

“So many questions need to be answered that Powell will have a high bar to clear if he and his committee are to avoid some fairly dramatic moves in volatility in the coming days.”

Beauchamp added that there were “uncomfortable memories” of 2007, when the Fed’s rate cut at the then record highs were followed by renewed turmoil in financial markets.

“Powell, and many investors, will be hoping the market follows 1995 instead.

“The situation seems much more like the latter than the former case, but so much of this cycle has been out of the ordinary that no one can rest too easily thinking about the outcome.”

UK inflation unchanged in August, house prices rise

In economic news, UK inflation remained unchanged in August, with the annual consumer price index holding steady at 2.2%, according to the Office for National Statistics.

The figure, in line with forecasts, remained above the Bank of England's 2% target, adding pressure on policymakers ahead of the central bank's next interest rate decision.

Services inflation increased to 5.6% from 5.2% in July, while core inflation, which excludes volatile items like energy and food, rose slightly to 3.6%, just above expectations of 3.5%.

“Inflation held steady in August as various price fluctuations offset each other,” said ONS chief economist Grant Fitzner.

“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.

“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels.”

The UK housing market meanwhile saw continued growth in July, marking a fifth consecutive month of rising prices.

According to HM Land Registry, house prices increased by 0.6% from June and 2.2% year-on-year, though the pace of growth slowed from 2.7% in June.

The average UK home now costs £289,000.

However, London and Yorkshire saw notable exceptions - London experienced a 0.3% monthly and 0.4% annual decline in prices, while Yorkshire saw a 0.5% monthly drop but a 3.7% annual rise.

In the grocery sector, sales growth slowed as the UK returned to more typical shopping patterns following the summer break.

Data from research firm NIQ showed total till sales grew by 4% in the four weeks ended 7 September, down from a 5.5% rise in the previous month.

Online sales outpaced in-store sales, with a 6.1% increase compared to a 1.8% rise in bricks-and-mortar outlets.

Fresh food sales were particularly strong, with produce up 8.1%.

Among retailers, Ocado led with a 15.4% year-on-year increase in sales, followed by Marks & Spencer at 12.4%.

Tesco remained the market leader with a 26.4% share, while discounters Aldi and Lidl held 10.3% and 7.3% shares, respectively.

“September is closely tied to a change in how we shop following ‘back to school’, so retailers typically reinvigorate marketing efforts as customers refocus on new routines as we go from summer to autumn,” said Mike Watkins, UK head of retailer and business insight at NIQ.

On the continent, eurozone inflation dropped to 2.2% in August, down from 2.6% in July.

That marked a significant decline from the 5.2% rate recorded in August 2023.

Construction production remained stable in July, with a modest 0.2% increase in the EU compared to June.

However, annual production fell by over 2% in both the eurozone and the broader EU.

In the US, housing starts surged 9.6% in August, reaching an annualised rate of 1.35 million, according to the Census Bureau.

The sharp rebound followed a 7% decline in July and marked the highest monthly increase in nine months.

Single-family home starts rose 15.8%, while building permits increased by 4.9%.

Legal & General falls after Cala Group sale, Wizz Air rises further

On London’s equity markets, Legal & General Group fell 2.34% after announcing the sale of UK housebuilder Cala Group for £1.35bn to Ferguson Bidco, a company owned by funds managed by Sixth Street Partners and Patron Capital.

The insurer said it would receive £1.16bn in cash, with £500m paid at closing and the rest over five years.

PZ Cussons experienced a significant drop, falling 15.21%.

The Imperial Leather manufacturer reported a full-year pre-tax loss, driven by the devaluation of the Nigerian naira, which has weighed heavily on its financial results.

On the upside, consumer goods giant Reckitt Benckiser rose 1.24% after reports surfaced that the company was in early discussions to sell its homecare assets, which could be valued at over £6bn.

Budget airline Wizz Air saw a 2.43% gain, continuing its rally after a report indicated that the company expects 15% to 20% passenger growth next year.

Chief executive Jozsef Varadi highlighted new low-cost routes to the Middle East, such as to the UAE, as a key factor driving future growth in talks with media earlier in the week.

In broker-related moves, InterContinental Hotels Group advanced 0.64% after receiving an upgrade to ‘buy’ from Goldman Sachs.

However, Premier Inn owner Whitbread dropped 1.09% following a downgrade to ‘neutral’ by the same firm.

Insurance companies saw mixed results, with Lancashire Holdings gaining 1.59% after a ‘buy’ upgrade from Goldman Sachs, while Hiscox slipped 1.19% following a downgrade to ‘neutral’.

Real estate company Hammerson rose 1.88% after being upgraded to ‘buy’ at Citi, while software group Kainos Group edged down 0.45% despite receiving a ‘buy’ rating from Deutsche Bank.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,253.68 -0.68%
FTSE 250 (MCX) 20,835.31 -0.52%
techMARK (TASX) 4,823.36 -0.66%

FTSE 100 - Risers

Reckitt Benckiser Group (RKT) 4,667.00p 1.24%
Rightmove (RMV) 681.20p 1.19%
Kingfisher (KGF) 326.60p 1.15%
Centrica (CNA) 118.15p 1.03%
WPP (WPP) 757.00p 0.93%
Smurfit Westrock (DI) (SWR) 3,591.00p 0.81%
Standard Chartered (STAN) 775.20p 0.73%
InterContinental Hotels Group (IHG) 7,914.00p 0.64%
Vodafone Group (VOD) 78.08p 0.59%
Burberry Group (BRBY) 608.20p 0.50%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 150.70p -5.95%
Rentokil Initial (RTO) 364.00p -4.59%
Diploma (DPLM) 4,498.00p -2.89%
Legal & General Group (LGEN) 222.30p -2.85%
Halma (HLMA) 2,578.00p -2.35%
Phoenix Group Holdings (PHNX) 541.00p -2.35%
Convatec Group (CTEC) 226.60p -2.33%
Spirax Group (SPX) 7,220.00p -2.10%
NATWEST GROUP (NWG) 335.00p -1.82%
Next (NXT) 10,335.00p -1.71%

FTSE 250 - Risers

North Atlantic Smaller Companies Inv Trust (NAS) 4,010.00p 4.43%
Aston Martin Lagonda Global Holdings (AML) 164.70p 2.81%
Auction Technology Group (ATG) 409.00p 2.76%
Wizz Air Holdings (WIZZ) 1,309.00p 2.43%
Just Group (JUST) 140.60p 2.33%
Carnival (CCL) 1,248.00p 2.21%
Hammerson (HMSO) 30.34p 1.88%
Lancashire Holdings Limited (LRE) 701.00p 1.59%
TP Icap Group (TCAP) 238.50p 1.49%
W.A.G Payment Solutions (WPS) 85.00p 1.43%

FTSE 250 - Fallers

PZ Cussons (PZC) 87.50p -15.21%
JTC (JTC) 1,022.00p -5.55%
Spectris (SXS) 2,676.00p -4.63%
IP Group (IPO) 46.50p -3.43%
Energean (ENOG) 905.50p -3.21%
NCC Group (NCC) 169.80p -2.97%
XPS Pensions Group (XPS) 291.00p -2.68%
Harworth Group (HWG) 182.00p -2.67%
Harbour Energy (HBR) 257.70p -2.50%
International Workplace Group (IWG) 170.40p -2.42%