London midday: Stocks fall as Chinese inflation data disappoints

London stocks fell on Friday as data showed Chinese inflation slowed more than expected in August and the UK trade deficit narrowed less than forecast in July.

China’s consumer price inflation rose 1.3% in August from a year earlier, down from July’s 1.8% and marking the lowest level since October 2015. It was also weaker than the 1.7% increase expected by economists.

The country’s producer price index fell 0.8% in August from a year ago, which was more or less in line with expectations and compared to a 1.7% fall in July.

On home soil, the UK’s deficit in trade in goods narrowed to £4.5bn in July from £5.5bn in June as exports rose, the Office for National Statistics revealed in its first trade data since the Brexit vote. Economists had expected a deficit of £4.2bn.

The exports of goods and services rose 1.9% in July from a month ago, supported by a weaker pound after the UK voted to leave the European Union. Imports dropped 0.5%.

“A major hope for the UK economy going forward is that the substantial overall weakening of the pound since the UK voted to leave the European Union in June’s referendum will increasingly feed through to boost foreign demand for UK goods and services,” said Howard Archer, chief European and UK economist at IHS Global Insight.

“While the pound has recently firmed from its post Brexit vote lows, it is still at an extremely competitive level and is likely to remain so for an extended period. Indeed, we believe that the pound could well soften further if current UK economic resilience falters over the coming months as we suspect it will.”

The pound edged up 0.02% against the dollar to $1.3297.

Separately, the ONS revealed construction output rose 1.5% year-on-year in July, surprising analysts who had expected a 3.4% fall and following a 0.7% drop in June.

Meanwhile, a Bank of England survey showed the proportion of Britons who believe the central bank will raise interest rates over the next year has plunged to a record low. It follows the BoE’s decision in August to cut interest rates to a record low of 0.25% after the Brexit vote in June.

The BoE said 21% of people surveyed in August expected the central bank to raise rates in the next 12 months, down from 41% in May.

Elsewhere, Germany’s trade surplus declined to €19.4bn in July from a revised €21.4bn in June. Economists had been expecting a surplus of €22bn.

Exports fell 2.6% on the month, which was the worst decline in almost a year and missed expectations of a 0.3% increase. Imports declined 0.7% on the month, missing forecasts of a 0.8% jump.

On the commodities front, oil prices retreated after rallying on Thursday on the back of a fall in weekly US crude inventories. Brent crude dropped 1.7% to $49.14 per barrel and West Texas Intermediate slid 1.6% to $46.86 per barrel at 1152 BST.

On the company front, Burberry shares declined after Goldman Sachs removed the stock from its Sustain Focus List, highlighting the company’s subdued outlook. It pointed out that over the last two years, Burberry has seen a weaker-than-expected financial performance, with earnings per share down 2% and group cash return on capital invested (CROCI) down 407 basis points to 17.7%.

JD Wetherspoon rallied after the pub operator reported record full year pre-tax profit and sales. The FTSE 250 firm’s profit before tax was up 3.6% at £77.8m with revenue rising 5.4% to £1.595bn, and like-for-like sales improving 3.4% over the prior year.

Greene King slumped after the pub company sounded a cautious note on the impact of the Brexit vote as it reported a 1.7% increase in like-for-like sales in the 18 weeks to 4 September. The group said uncertainty surrounding the UK's future withdrawal from the European Union has “translated into a softening of some economic indicators and a reduction in consumer confidence”.

Airline stocks IAG and EasyJet continued to fly higher after EZJ’s chief executive officer Carolyn McCall said financial markets had overreacted to the UK’s decision to leave the European Union.

Market Movers

FTSE 100 (UKX) 6,841.48 -0.25%
FTSE 250 (MCX) 18,081.36 -0.61%
techMARK (TASX) 3,477.53 -0.44%

FTSE 100 - Risers

Royal Bank of Scotland Group (RBS) 206.40p 2.13%
Mediclinic International (MDC) 980.50p 1.66%
Barclays (BARC) 175.70p 1.44%
International Consolidated Airlines Group SA (CDI) (IAG) 427.40p 1.26%
easyJet (EZJ) 1,211.00p 1.17%
HSBC Holdings (HSBA) 579.30p 1.05%
Lloyds Banking Group (LLOY) 59.47p 1.04%
Rio Tinto (RIO) 2,390.00p 0.87%
Sky (SKY) 868.00p 0.70%
BHP Billiton (BLT) 1,022.50p 0.69%

FTSE 100 - Fallers

Ashtead Group (AHT) 1,245.00p -3.49%
Bunzl (BNZL) 2,285.00p -3.34%
Burberry Group (BRBY) 1,248.00p -2.88%
Berkeley Group Holdings (The) (BKG) 2,669.00p -2.02%
Old Mutual (OML) 195.00p -1.96%
Intu Properties (INTU) 301.00p -1.95%
Marks & Spencer Group (MKS) 346.30p -1.87%
Next (NXT) 5,520.00p -1.78%
Taylor Wimpey (TW.) 157.70p -1.74%
Hikma Pharmaceuticals (HIK) 2,114.00p -1.63%

FTSE 250 - Risers

Wetherspoon (J.D.) (JDW) 969.50p 4.92%
AA (AA.) 304.20p 4.54%
Sports Direct International (SPD) 330.00p 2.93%
Cairn Energy (CNE) 193.90p 1.78%
Polar Capital Technology Trust (PCT) 748.00p 1.63%
Playtech (PTEC) 914.50p 1.55%
Serco Group (SRP) 134.00p 1.52%
G4S (GFS) 246.20p 1.48%
Dechra Pharmaceuticals (DPH) 1,373.00p 1.40%
Kaz Minerals (KAZ) 192.70p 1.31%

FTSE 250 - Fallers

Inchcape (INCH) 677.50p -4.85%
Greene King (GNK) 803.00p -4.40%
Hochschild Mining (HOC) 267.20p -3.61%
Debenhams (DEB) 61.75p -3.59%
Genus (GNS) 1,846.00p -3.50%
Tullow Oil (TLW) 229.80p -3.24%
Thomas Cook Group (TCG) 73.75p -3.02%
Howden Joinery Group (HWDN) 448.50p -2.71%
SIG (SHI) 123.50p -2.68%
Countrywide (CWD) 257.10p -2.35%