London midday: Housebuilders and real estate stocks pull FTSE higher

A surprise drop in UK inflation triggered some big gains for London-listed property stocks on Wednesday, with hopes rising that the Bank of England's next interest-rate hike might just be its last.

The FTSE 100 was up 0.7% at 7,716 at the midday mark. It has not closed above this level since 23 May.

The year-on-year change in the UK consumer price index (CPI) eased to 6.7% last month, from 6.8% in July and surprising economists who had forecast a slight tick-up to 7.1%.

Importantly, core inflation dropped to 6.2% in August, from 6.9% the month before. While this is still more than three times the BoE's target, it's a strong step in the right direction and well below the 6.8% reading expected by analysts.

"What [the data] does support is the recent market pricing favouring a one-and-done hike in September and no more thereafter," said Neil Wilson, analyst at Markets.com. "With the Fed about to pause and the ECB signalling it thinks it is done with hiking, the BoE won’t want to be the outlier."

FOMC and BoE in focus

The Bank of England meets on Thursday and is widely expected to hike interest rates by a further 25 basis points to 5.5%, but a downside surprise in UK inflation data for August could prevent policymakers from further tightening beyond September.

Economist Emma Wilks from Lloyds Bank said that the BoE is unlikely to place too much emphasis on Wednesday's inflation figures alone as it waits for more data to show a continuing downward trend. "However, the broader slowing of price growth momentum [...] will likely reassure them that the current tightening cycle is nearing its peak," Wilks said.

Meanwhile, the Federal Open Market Committee meeting kicked off on Tuesday afternoon and will conclude later today – though the policy decision and statement will not come out before the closing bell in London.

"A pause is still widely expected but it’s going to be the accompanying commentary which will set the tone, with investors on tenterhooks about what the Fed’s next steps will be and when cuts will be on the agenda," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Property stocks build on gains

Property stocks were the big movers of the day after the surprise drop in UK inflation. With a surge in mortgage rates and sluggish demand for property leading to falling profits for housebuilders and valuation declines at real estate groups over recent months, the CPI data has raised hopes we may be nearing the trough in the cycle.

On the FTSE 100, Taylor Wimpey, Land Securities, Barratt Developments and SEGRO were among the best performers, while FTSE 250 peers Crest Nicholson, British Land, Bellway, Persimmon, Redrow and Derwent London were also putting in impressive gains.

Real estate group Supermarket Income, meanwhile, was given an extra boost after it reported a 30% spike in its annualised passing rent to £100.6m.

Shares in educational publisher Pearson fell 3% after the company announced the exit of its chief executive Andy Bird. Bird joined as Pearson's boss in October 2020 from Walt Disney, and the stock has jumped by nearly two thirds under his leadership. Pearson said that Microsoft executive Omar Abbosh would take Bird's place in early 2024 as he retires.

Global investment manager M&G was in demand after posting stronger-than-expected interim profits. Adjusted operating profits came in at £390m (consensus: £284m) as the firm said it was on track to meet its 2024 operating capital generation target of £2.5bn.

Oil heavyweights BP and Shell declined as crude prices pulled back after recent gains. Brent was down 0.9% at $93.55 a barrel after surpassing the $95 level on Tuesday.

Market Movers

FTSE 100 (UKX) 7,716.00 0.73%
FTSE 250 (MCX) 18,696.39 1.46%
techMARK (TASX) 4,394.56 1.10%

FTSE 100 - Risers

Taylor Wimpey (TW.) 121.60p 5.46%
Land Securities Group (LAND) 610.20p 4.70%
Barratt Developments (BDEV) 464.20p 4.43%
SEGRO (SGRO) 752.00p 4.24%
Unite Group (UTG) 940.50p 4.21%
B&M European Value Retail S.A. (DI) (BME) 577.40p 3.70%
Kingfisher (KGF) 214.00p 3.48%
BT Group (BT.A) 120.35p 3.44%
Hargreaves Lansdown (HL.) 829.80p 3.39%
Lloyds Banking Group (LLOY) 44.24p 3.14%

FTSE 100 - Fallers

Pearson (PSON) 858.40p -2.90%
Smurfit Kappa Group (CDI) (SKG) 2,848.00p -1.79%
BAE Systems (BA.) 1,042.50p -1.56%
WPP (WPP) 755.40p -1.25%
Mondi (MNDI) 1,357.50p -1.24%
Burberry Group (BRBY) 2,044.00p -1.02%
Shell (SHEL) 2,588.00p -0.96%
BP (BP.) 520.00p -0.91%
Centrica (CNA) 171.10p -0.81%
Melrose Industries (MRO) 490.90p -0.81%

FTSE 250 - Risers

Elementis (ELM) 123.40p 10.57%
Bytes Technology Group (BYIT) 509.00p 7.57%
Crest Nicholson Holdings (CRST) 190.70p 5.77%
British Land Company (BLND) 325.00p 5.14%
Bellway (BWY) 2,264.00p 4.81%
Tritax Big Box Reit (BBOX) 144.60p 4.78%
Persimmon (PSN) 1,096.50p 4.78%
Supermarket Income Reit (SUPR) 78.50p 4.67%
Redrow (RDW) 516.50p 4.64%
Derwent London (DLN) 1,940.00p 4.41%

FTSE 250 - Fallers

Bank of Georgia Group (BGEO) 3,585.00p -3.89%
Dunelm Group (DNLM) 1,066.00p -1.57%
Volution Group (FAN) 347.00p -1.53%
CAB Payments Holdings (CABP) 242.50p -1.42%
TBC Bank Group (TBCG) 2,930.00p -1.35%
C&C Group (CDI) (CCR) 137.60p -1.15%
JPMorgan Indian Investment Trust (JII) 866.00p -1.14%
Babcock International Group (BAB) 380.20p -0.78%
Ceres Power Holdings (CWR) 367.40p -0.76%
Clarkson (CKN) 2,760.00p -0.72%