London midday: Stocks fall on geopolitical worries

London stocks fell on Tuesday as better-than-expected UK inflation data failed to offset geopolitical worries.

The UK consumer price index rose 0.5% in the year to June, which was higher than the 0.3% increase a month ago and topped economists' predictions for a 0.4% rise. Month-on-month, CPI was up 0.2%, the same rate as last month, as forecast.

“Today’s figures were collected before the EU referendum, so recent falls in the value of the pound will have had no impact on them,” ONS statistician Phil Gooding said.

“The rising cost of European air flights, possibly boosted by the Euro football championships, was the biggest reason for this month’s increase in inflation. The growing cost of oil, feeding through to petrol prices, also helped nudge up CPI," he added.

Economist Howard Archer at IHS Global Insight said the sterling weakness following the 23 June Brexit vote looks set to increasingly feed through over the coming months to markedly push inflation higher as it raises prices for imported goods and services, oil and commodities.

Archer forecasts consumer price inflation, helped by the soft pound, will rise to around 1.5% by the end of 2016, moving above the Bank of England's 2.0% target around spring 2017.

Meanwhile, geopolitical concerns continued to weigh on sentiment amid the turmoil in Turkey and in the wake of the recent terror attack in Nice.

CMC Markets’ Jasper Lawler said: “Geopolitical shocks have played their part in holding down European markets over the past two trading days with investors concerned by events in Nice and Turkey. Late last night an Afghan refugee was reportedly killed by police in Germany for attacking train passengers with a knife and axe, in what appears to be another terrorist-motivated lone wolf attack.”

At the same time, oil prices slipped, with Brent crude down 0.47% to $46.74 per barrel and West Texas Intermediate down 0.06% to $45.21 per barrel at 1154 BST.

Elsewhere, concerns over Brexit sent German investor confidence to its lowest level since November 2012 in July, according to the latest survey from the ZEW Center for European Economic Research in Mannheim. The indicator of economic sentiment fell to -6.8 from 19.2 in June, missing expectations for a reading of 9.0.

In the UK, house prices rose 1.1% in May compared to a month ago, even in the uncertainty leading up to Britain’s European Union referendum on 23 June, the Office for National Statistics revealed. The average price of a home in the UK was £211,230 in May, up 8.1% on the same month a year ago. It followed April’s 8.2% year-on-year increase and 0.8% month-on-month gain.

Still to come, Bank of England’s Ben Broadbent is due to speak at the Lords Economic Affairs Committee at 1505 BST and US housing starts will be released at 1330 BST.

In company news, Rio Tinto shares fell as it said second quarter iron ore production from its mines in Western Australia's Pilbara rose 8% to nearly 81m from the same time a year ago. Pilbara iron ore shipments rose 6% to 82.2m tonnes.

Fellow miners Glencore, Anglo American and BHP Billiton also slumped.

“With risk appetite on the wane for now, it is not surprising to see miners take a hit, with Rio’s decision to boost iron ore output resurrecting the ghost of vast surpluses of metals,” said Chris Beauchamp, senior market analyst at IG.

“Now might not be the time to be putting a foot on the production accelerator, but management can hardly be blamed for seeking an escape route after a long period of difficult trading.”

Evraz dropped as the Russian steel maker consolidated second quarter crude steel output fell 9.9% to 3.2m tonnes against the previous three months, primarily due to planned capital repairs at a blast furnace.

On the upside, Sky shares gained as RBC Capital Markets lifted its rating on the stock to ‘outperform’ from ‘underperform’ and raised its target price to 1,100p from 1,000p.

Royal Mail also rallied as it said trading for the three months ended 26 June was in line with its expectations, with group revenue up 1% and UK revenue down 1%.

Market Movers

FTSE 100 (UKX) 6,670.68 -0.37%
FTSE 250 (MCX) 16,830.99 -0.22%
techMARK (TASX) 3,373.24 -0.02%

FTSE 100 - Risers

Coca-Cola HBC AG (CDI) (CCH) 1,560.00p 2.56%
Randgold Resources Ltd. (RRS) 8,965.00p 1.88%
Sky (SKY) 895.50p 1.76%
Sage Group (SGE) 677.00p 1.35%
Carnival (CCL) 3,537.00p 1.26%
Land Securities Group (LAND) 1,053.00p 1.06%
Merlin Entertainments (MERL) 475.60p 1.02%
Fresnillo (FRES) 1,889.00p 0.80%
British Land Company (BLND) 633.00p 0.80%
Royal Mail (RMG) 505.50p 0.70%

FTSE 100 - Fallers

Glencore (GLEN) 179.45p -3.73%
Rio Tinto (RIO) 2,376.00p -3.51%
Anglo American (AAL) 805.10p -3.23%
BHP Billiton (BLT) 947.70p -2.98%
Antofagasta (ANTO) 488.50p -2.88%
ITV (ITV) 185.20p -2.83%
easyJet (EZJ) 1,110.00p -2.46%
Tesco (TSCO) 162.85p -1.90%
Barclays (BARC) 148.15p -1.85%
Standard Life (SL.) 281.80p -1.85%

FTSE 250 - Risers

Ascential (ASCL) 254.30p 3.46%
Micro Focus International (MCRO) 1,883.00p 2.78%
Sophos Group (SOPH) 235.50p 2.39%
Polymetal International (POLY) 1,123.00p 2.28%
Fidessa Group (FDSA) 2,409.00p 2.21%
Dechra Pharmaceuticals (DPH) 1,231.00p 2.16%
CLS Holdings (CLI) 1,387.00p 2.14%
Elementis (ELM) 216.90p 2.07%
Dairy Crest Group (DCG) 583.00p 2.01%
Allied Minds (ALM) 377.30p 1.97%

FTSE 250 - Fallers

Evraz (EVR) 153.40p -5.54%
Weir Group (WEIR) 1,479.00p -4.52%
Amec Foster Wheeler (AMFW) 462.00p -4.23%
Cairn Energy (CNE) 192.10p -4.09%
SIG (SHI) 106.00p -3.81%
Wood Group (John) (WG.) 662.50p -3.78%
Electrocomponents (ECM) 259.50p -2.81%
DFS Furniture (DFS) 210.70p -2.77%
Kaz Minerals (KAZ) 131.60p -2.73%
Essentra (ESNT) 630.50p -2.70%