London midday: FTSE turns negative ahead of ECB; travel shares slump

London stocks had moved into the red by midday on Thursday ahead of the latest policy announcement from the European Central Bank and PPI reading in the US, as investors continued to mull the impact of a hotter-than-expected US inflation print.

The FTSE 100 was down 0.3% at 7,940.12.

Russ Mould, investment director at AJ Bell, said: "After yesterday’s US inflation figures knocked the market for six, it’s no wonder that equities struggled for direction on Thursday.

"Hotter-than-expected inflation data has given the Federal Reserve yet another reason to sit on its hands and kick the prospect of a rate cut further down the road. The signs have been clear to see for a while and investors are now having to readjust their expectations for when we will finally see the much desired ‘pivot’ in monetary policy.

"Wall Street threw its toys out of the pram yesterday, with the S&P 500 down 1% and the small cap-focused Russell 2000 falling by 2.5% as risk appetite diminished. Futures prices indicate that US markets won’t have a second miserable session in a row when markets open for trading across the pond today, implying that we simply saw a knee-jerk reaction from investors and they’ve now had time to make more rational decisions.

"All this drama implies the ECB interest rate decision later today is not going to make pulses beat any faster. Rates are expected to be left unchanged at 4.5%. It will likely be accompanied by the usual message that the central bank will be ready to start cutting rates once there is sufficient evidence of inflation falling towards target."

The US producer price index for March is due at 1330 BST, while the ECB policy announcement is at 1315 BST.

On home shores, Megan Greene, an external member of the Bank of England’s monetary policy committee, wrote a column for the Financial Times in which she argued that UK interest rate cuts "should still be a way off" and said investors were underestimating the risk that high inflation would linger for longer in Britain than in other advanced economies.

Greene, who is one of the more hawkish members of the MPC, said: "Following surprisingly strong US March CPI inflation, markets now expect the Bank of England will cut rates earlier and by more than the Federal Reserve this year.

"Macroeconomic fundamentals and inflation dynamics differ in the UK and US, and there’s a greater risk of persistence in the former. The markets are moving rate cut bets in the wrong direction."

Investors were also digesting an industry survey out earlier, which showed the housing market continued to strengthen last month as prices stabilised and buyer demand improved.

According to the latest RICS UK Residential Survey, buyer demand had a net balance of 8 in March, the most positive result since February 2022.

New instructions also strengthened, with a balance of 13.

In equity markets, Aviva, Barratt Developments, Lloyds, Reckitt Benckiser, Phoenix Group, Smurfit Kappa, Man Group, Howden Joinery, Grafton Group, Just Group, Savills, TP ICAP, Harbour Energy, Hunting and ITV all traded without entitlement to the dividend.

Travel shares were under the cosh amid the potential threat of an Iranian attack on Israel. BA and Iberia owner IAG, easyJet, Carnival and Tui all fell.

On the upside, B&Q and Castorama owner Kingfisher gained after an upgrade to ‘buy’ at HSBC, while Smiths Group also rose after an upgrade to ‘buy’ by the same outfit.

Marks & Spencer was boosted by an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan.

AstraZeneca advanced after announcing a 7% increase to the annual dividend. "This uplift is in line with our progressive dividend policy, which remains unchanged, and reflects the continuing strength of AstraZeneca's investment proposition for shareholders," said chair Michel Demaré.

Cybersecurity specialist Darktrace surged as it lifted its guidance for the year after a strong third quarter saw annualised recurring revenue grow 23.5% year-on-year to $731.1m.

Outside the FTSE 350, self-storage firm Lok'nStore jumped as it agreed to be bought by Belgian rival Shurgard in a £378m deal.

Market Movers

FTSE 100 (UKX) 7,940.12 -0.26%
FTSE 250 (MCX) 19,722.54 -0.40%
techMARK (TASX) 4,443.26 0.03%

FTSE 100 - Risers

Centrica (CNA) 131.10p 4.05%
Kingfisher (KGF) 246.80p 1.94%
AstraZeneca (AZN) 10,932.00p 1.86%
Smiths Group (SMIN) 1,631.00p 1.68%
BP (BP.) 527.90p 1.50%
SSE (SSE) 1,608.00p 1.29%
Bunzl (BNZL) 3,004.00p 1.21%
Imperial Brands (IMB) 1,700.00p 1.19%
Hikma Pharmaceuticals (HIK) 1,802.00p 0.78%
RS Group (RS1) 732.00p 0.76%

FTSE 100 - Fallers

Phoenix Group Holdings (PHNX) 507.50p -6.45%
Aviva (AV.) 461.30p -5.84%
Tesco (TSCO) 283.50p -4.55%
Lloyds Banking Group (LLOY) 50.80p -4.37%
International Consolidated Airlines Group SA (CDI) (IAG) 168.45p -4.04%
easyJet (EZJ) 548.40p -3.96%
Whitbread (WTB) 3,141.00p -3.38%
Sainsbury (J) (SBRY) 260.80p -2.40%
Barclays (BARC) 185.02p -2.35%
Rolls-Royce Holdings (RR.) 399.40p -2.23%

FTSE 250 - Risers

Darktrace (DARK) 460.40p 5.86%
Safestore Holdings (SAFE) 750.00p 3.16%
Watches of Switzerland Group (WOSG) 365.60p 3.04%
Drax Group (DRX) 494.40p 2.32%
Tate & Lyle (TATE) 644.00p 2.06%
Genus (GNS) 1,796.00p 1.81%
Bakkavor Group (BAKK) 115.50p 1.76%
Wood Group (John) (WG.) 139.80p 1.67%
Close Brothers Group (CBG) 478.60p 1.66%
Renishaw (RSW) 4,165.00p 1.59%

FTSE 250 - Fallers

ITV (ITV) 70.00p -4.37%
Carnival (CCL) 1,047.50p -4.25%
Savills (SVS) 1,016.00p -4.15%
Paragon Banking Group (PAG) 672.00p -4.07%
International Public Partnerships Ltd. (INPP) 119.80p -3.85%
Man Group (EMG) 265.00p -3.78%
TUI AG Reg Shs (DI) (TUI) 651.50p -3.77%
Jupiter Fund Management (JUP) 87.10p -3.76%
OSB Group (OSB) 376.80p -3.38%
TP Icap Group (TCAP) 214.50p -3.38%