London close: Stocks weaker as inflation continues to sizzle

London stocks closed just below the line on Wednesday, as investors digested data showing UK consumer prices increasing at the fastest clip since March 1992 in January.

The FTSE 100 ended the session down 0.07% at 7,603.78, and the FTSE 250 was off 0.11% at 21,828.94.

Sterling, meanwhile, was in positive territory, last trading up 0.34% on the dollar at $1.3584, and strengthening 0.16% against the euro to €1.1937.

“Yesterday’s relief rally on reports that Russian troops were returning to their bases has given way to more caution today, after it turns out that Russian claims don’t appear to be matched by deeds,” said CMC Markets chief market analyst Michael Hewson.

“While the Russians are saying one thing, NATO and the US are reporting that Russian troop numbers are rising near the Ukraine border, and that no de-escalation appears to be happening, making markets increasingly susceptible to headline risk.

“And so, the phoney war goes on, as the pullback in stock markets prompts a move into government bonds sending yields into retreat.”

Hewson also noted that oil prices were rebounding after Tuesday’s steep fall, helping the energy sector with BP and Shell outperforming.

On the economic front, figures from the Office for National Statistics showed UK inflation hitting 5.5% in January, as consumer prices reached their highest levels since 1992.

The rise compared with December's 5.4% and forecasts of an unchanged figure is another sign of the increasing squeeze on household budgets.

According to the ONS, there were fewer January sales this year, as retailers looked to pass on higher costs.

“Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year,” said ONS chief economist Grant Fitzner.

He added that the rising cost of some household goods and increases in rents also pushed up inflation.

However, these were partially offset by lower fuel prices after record highs at the end of last year.

Electricity prices rose by 19.2% year-on-year, with gas prices surging 28.3% due to energy price cap increases last April and October 2021, and rising energy prices in Northern Ireland, which is not subject to regulatory capping measures.

The Bank of England earlier this month said it expected inflation would peak at around 7.25% in April, when a 54% rise in regulated household energy bills take effect.

It has already hiked interest rates twice since December to 0.5% from 0.1%.

Economists were tipping another rise to 0.75% or 1% on March 17 after the central bank’s next meeting.

Elsewhere, the average UK house price increased 10.8% in the year to December, putting further pressure on buyers as interest rates and taxes rise.

According to the latest UK house price index from the ONS, house prices rose £27,000 to £275,000 in December - 0.8% higher than in November.

The ONS said the average house price across the whole of the UK, as well as in England and Wales, reached record levels in December, with Welsh prices up 13.0% year on year to an average record level of £205,000.

Scotland recorded an 11.2% increase.

English property values were up by 10.7%, with the average house price at a record high of £293,000 in December.

Myron Jobson, senior personal finance analyst at Interactive Investor, said many first-time buyers were disillusioned by the constant struggle to get onto the property ladder.

“Runaway price rises mean property values are through the ceiling of what many buyers can afford to pay.

“Add to that surging inflation, which has climbed to a 30-year high and outstrips wage growth, the spectre of higher interest rates to combat it and the cost-of-living squeeze, home ownership will remain a pipe dream for many.

“And they can’t rely on the Bank of Mum and Dad, which might need extra cash to shore up its financial position amid the escalating cost of living crisis.”

In equity markets, Indivior rocketed 14.05% after it said it was considering a US listing for its shares, as the drugs company swung to an annual profit and predicted strong growth for its Sublocade opioid.

Primary Health Properties rose 0.9% after it lifted its dividend and unveiled a rise in annual earnings, driven by demand for facilities to catch up on the backlog of delayed operations due to the Covid pandemic.

Tritax EuroBox saw its euro shares rise 2.48% and its sterling shares grow 2.55%, after it conditionally agreed the acquisition of a €144.26m (£121.12m) prime logistics asset in Roosendaal, the Netherlands, from one of its development and asset management partners Logistics Capital Partners (LCP).

Precious metals miners Polymetal International and Fresnillo both shone as gold prices rose, advancing 5.05% and 3.67%, respectively.

“Gold is trading a little higher again today and above $1,850 where it has dipped below over the last 24 hours,” said Oanda analyst Craig Erlam.

“This is the first big test of support, with it having been a major barrier of resistance in January.

“If it can hold above here, we could see it target yesterday's highs again in the coming days and weeks even as the risk of a Russian invasion declines.”

Banks were a feature on the downside, meanwhile, with Standard Chartered falling 0.62%, Lloyds Banking Group off 1.33%, HSBC losing 1.17%, and Barclays 1.24% lower.

In broker note action, BAE Systems was 0.66% weaker after a downgrade to ‘equalweight’ at Morgan Stanley, and Howden Joinery Group lost 0.85% even after an upgrade to ‘buy’ from Citi.

Market Movers

FTSE 100 (UKX) 7,603.78 -0.07%
FTSE 250 (MCX) 21,828.94 -0.11%
techMARK (TASX) 4,398.82 -0.12%

FTSE 100 - Risers

Polymetal International (POLY) 1,186.50p 5.05%
Fresnillo (FRES) 666.40p 3.67%
SSE (SSE) 1,582.00p 1.90%
Anglo American (AAL) 3,582.00p 1.88%
BP (BP.) 403.75p 1.61%
Land Securities Group (LAND) 805.60p 1.51%
British Land Company (BLND) 547.40p 1.41%
SEGRO (SGRO) 1,278.00p 1.35%
Dechra Pharmaceuticals (DPH) 3,938.00p 1.34%
Rolls-Royce Holdings (RR.) 121.72p 1.16%

FTSE 100 - Fallers

Royal Mail (RMG) 426.20p -2.67%
Diageo (DGE) 3,603.50p -2.05%
Ocado Group (OCDO) 1,337.00p -1.91%
JD Sports Fashion (JD.) 166.00p -1.69%
Electrocomponents (ECM) 1,022.00p -1.64%
Halma (HLMA) 2,345.00p -1.55%
Rightmove (RMV) 628.40p -1.54%
Tesco (TSCO) 294.75p -1.49%
Spirax-Sarco Engineering (SPX) 12,010.00p -1.44%
Compass Group (CPG) 1,788.50p -1.43%

FTSE 250 - Risers

Indivior (INDV) 259.80p 14.05%
Hilton Food Group (HFG) 1,068.00p 4.30%
Ferrexpo (FXPO) 293.20p 3.09%
Wood Group (John) (WG.) 243.20p 3.05%
Endeavour Mining (EDV) 1,790.00p 2.87%
Centamin (DI) (CEY) 92.48p 2.76%
Tritax Eurobox (GBP) (EBOX) 104.00p 2.55%
Trustpilot Group (TRST) 161.10p 2.36%
Dr. Martens (DOCS) 287.60p 2.35%
Energean (ENOG) 952.50p 2.31%

FTSE 250 - Fallers

Darktrace (DARK) 341.80p -4.95%
PureTech Health (PRTC) 262.50p -4.91%
Baltic Classifieds Group (BCG) 167.50p -4.56%
Future (FUTR) 2,750.00p -3.51%
Baillie Gifford US Growth Trust (USA) 229.50p -3.37%
TBC Bank Group (TBCG) 1,578.00p -3.19%
Reach (RCH) 243.50p -3.18%
FDM Group (Holdings) (FDM) 920.00p -3.15%
4Imprint Group (FOUR) 2,655.00p -3.10%
Diploma (DPLM) 2,598.00p -3.05%