London midday: Stocks fall further as investors eye Fed; IHG jumps on upgrade

London stocks had fallen further into the red by midday on Wednesday as investors mulled the latest UK inflation reading and looked ahead to a policy announcement from the US Federal Reserve.

The FTSE 100 was down 0.6% at 8,259.56.

Data released earlier by the Office for National Statistics showed that consumer price inflation was unchanged at 2.2% in the year to August, in line with expectations and above the BoE’s 2% target.

Services inflation rose to 5.6% in August from 5.2% in July, also as expected.

Core CPI - which excludes energy, food, alcohol and tobacco - rose to 3.6% from 3.3% in July. This was a touch above expectations of 3.5%.

ONS chief economist Grant Fitzner said: "Inflation held steady in August as various price fluctuations offset each other.

"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. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year."

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The optimism which had been simmering on financial markets is coming off the boil ahead of crunch interest rate decisions.

"While inflation in the UK is unchanged at 2.2%, a rise in services inflation mainly due to a big leap in airfare costs is likely to keep policymakers more reticent about reducing rates again on Thursday. The FTSE 100 has fallen back slightly in early trade as uncertainty surrounds central bank policy."

Still to come, the Fed will make its latest policy announcement at 1900 BST.

Streeter said: "With a cut looking like a dead cert, it will be the first time in four and a half years that the benchmark rate will be reduced, offering relief to companies and consumers. The current expectation is for the Fed to go with a larger than usual 50bps cut given that inflation is heading down and consumer spending has been buoyant. But there is autumn uncertainty in the air.

"Inflation has not quite hit target and there may still be some wariness that it could bubble up again if the decision unleashes a wave of optimism, so a 25bps cut is still in play. A smaller than forecast cut may disappoint some investors, but on the other hand it may demonstrate that the Fed is not deeply concerned that the prospect of a damaging downturn is looming. Focus will quickly turn to the likelihood of a deeper cut later in the year, and commentary from the Fed chair for clues about just how many rate reductions will come in succession."

In equity markets, Legal & General fell after saying it had sold UK house builder CALA Group for £1.35bn to Ferguson Bidco, an entity owned by funds managed by Sixth Street Partners and Patron Capital. The insurer said it would receive cash proceeds of £1.16bn, of which £500m will be paid at closing with the remaining consideration being paid over the next five years.

PZ Cussons tumbled as the Imperial Leather maker said it swung to a full-year pre-tax loss due to the devaluation of the Nigerian naira.

Consumer goods giant Reckitt Benckiser rallied following a Bloomberg report it has launched early discussions with potential suitors for a sale of its homecare assets, which could be worth more than £6bn.

In broker note action, InterContinental Hotels shot to the top of the FTSE 100 after an upgrade to ‘buy’ at Goldman Sachs, while Premier Inn owner Whitbread was weaker after a downgrade to ‘neutral’ by the same outfit.

Goldman also upgraded Lancashire Holdings to ‘buy’ and downgraded Hiscox to ‘neutral’.

Hammerson was lifted to ‘buy’ at Citi and Kainos gained after an upgrade to ‘buy’ at Deutsche Bank.

Market Movers

FTSE 100 (UKX) 8,259.56 -0.61%
FTSE 250 (MCX) 20,868.47 -0.36%
techMARK (TASX) 4,833.64 -0.45%

FTSE 100 - Risers

InterContinental Hotels Group (IHG) 7,968.00p 1.32%
Reckitt Benckiser Group (RKT) 4,649.00p 0.85%
Marks & Spencer Group (MKS) 372.70p 0.65%
Centrica (CNA) 117.60p 0.56%
Haleon (HLN) 399.20p 0.55%
BAE Systems (BA.) 1,280.00p 0.55%
Smurfit Westrock (DI) (SWR) 3,577.00p 0.42%
Smith (DS) (SMDS) 479.40p 0.21%
Standard Chartered (STAN) 771.00p 0.18%
Vodafone Group (VOD) 77.76p 0.18%

FTSE 100 - Fallers

Halma (HLMA) 2,574.00p -2.50%
Legal & General Group (LGEN) 223.10p -2.32%
Diploma (DPLM) 4,534.00p -2.12%
JD Sports Fashion (JD.) 156.70p -1.88%
Burberry Group (BRBY) 594.20p -1.82%
Croda International (CRDA) 3,985.00p -1.73%
Rentokil Initial (RTO) 375.00p -1.70%
Convatec Group (CTEC) 228.20p -1.64%
Spirax Group (SPX) 7,260.00p -1.56%
Phoenix Group Holdings (PHNX) 546.00p -1.44%

FTSE 250 - Risers

W.A.G Payment Solutions (WPS) 86.60p 3.34%
North Atlantic Smaller Companies Inv Trust (NAS) 3,940.00p 2.60%
Auction Technology Group (ATG) 405.00p 1.76%
Bridgepoint Group (Reg S) (BPT) 380.00p 1.71%
Kier Group (KIE) 143.60p 1.41%
Computacenter (CCC) 2,494.00p 1.38%
Aston Martin Lagonda Global Holdings (AML) 162.10p 1.19%
Kainos Group (KNOS) 890.00p 1.14%
TBC Bank Group (TBCG) 2,840.00p 1.07%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 80.50p 1.00%

FTSE 250 - Fallers

PZ Cussons (PZC) 94.70p -8.24%
Spectris (SXS) 2,662.00p -5.13%
Moonpig Group (MOON) 196.60p -2.91%
Energean (ENOG) 910.50p -2.67%
Petershill Partners (PHLL) 217.50p -2.47%
Hochschild Mining (HOC) 178.20p -2.41%
Centamin (DI) (CEY) 151.70p -1.75%
NCC Group (NCC) 172.00p -1.71%
Oxford Instruments (OXIG) 2,065.00p -1.67%
JTC (JTC) 1,064.00p -1.66%