London midday: Stocks pare losses as pound hit by inflation data

London stocks had pared earlier losses to trade flat by midday as the pound took a hit from news that UK inflation unexpectedly eased back last month, pouring cold water on rate hike expectations.

The FTSE 100 was flat at 7,404.14, while the pound was down 0.9% against the euro at 1.1270 and 0.2% weaker versus the dollar at 1.3029. The index tends to benefit from a weaker pound as around 70% of its constituents derive their earnings from overseas.

Sterling had been trading higher against the dollar earlier in the session, as the greenback was hit late on Monday after US President Trump's healthcare bill failed to get congressional approval again, casting further doubt on his ability to get any of his policies through. However, it was knocked lower after data from the Office for National Statistics revealed the consumer price index was 2.6% higher in June than the same month last year, softening from the 2.9% rate in May.

Most economists had expected the headline rate of CPI to remain roughly the same or at least only shrink to 2.8%, although the number was in line with the Bank of England’s latest forecast.

Month on month CPI was flat in June, when it was forecast to ease to 0.2% from the 0.3% rate a month before.

Core CPI, which strips out more volatile prices such as fuel and food, softened to 2.4% from the 2.6% at which it was predicted to remain.

CPIH, the ONS's newly preferred measure of inflation as it includes owner-occupiers' housing costs, dropped back to 2.6% from the prior month's 2.7%, where it was forecast to stay.

Petroleum products were mainly behind the drop in the annual growth rate of factory gate prices, ONS said, with crude oil mainly responsible for the recent slowing of input price inflation, with both its dollar price down and some recovery in sterling, while the change in core CPI reflected a fall in toys and games prices.

IG analyst Chris Beauchamp said: "Price growth saw its first drop since April 2016, prompting a sudden drop in a seemingly-unstoppable rally in GBPUSD. Suddenly, the wage squeeze in the UK seems slightly less acute, but the BoE could now be facing a similar problem to the Fed in the US - how to deal with a recovery that is good in parts, such as job growth, but is missing the fundamental ingredient of inflation. While the bounce in the FTSE will be welcome it still seems like we are at the mercy of currency fluctuations, with little in the way of fundamental news to drive the market higher."

On the corporate front, British Land was the standout gainer after announcing a £300m buyback, with Royal Mail following close behind as it reported that continued strong sales from its European parcels operation in the first quarter offset a decline from its UK business.

Just Group gained as it posted a 3% rise in new business sales for the six months to the end of June, while IG Group surged after reporting a 3% increase in full-year pre-tax profit.

Dairy Crest was little higher after it said trading in the first quarter was in line with expectations and the company's outlook for the full year remains unchanged.

On the downside, information services company Experian retreated as it said total revenue grew 5% at actual exchange rates in the first quarter, driven by 17% growth in Latin America, 8% in North America and 5% in the EMEA/Asia Pacific region. However, revenue for the UK and Ireland for the three months to 30 June dropped 13%.

Rio Tinto ticked lower after cutting its full-year forecasts for iron ore shipments.

Market Movers

FTSE 100 (UKX) 7,404.14 0.00%
FTSE 250 (MCX) 19,573.62 0.27%
techMARK (TASX) 3,507.97 0.39%

FTSE 100 - Risers

British Land Company (BLND) 622.50p 3.06%
Royal Mail (RMG) 411.00p 3.06%
G4S (GFS) 338.40p 2.61%
Land Securities Group (LAND) 1,029.00p 1.88%
Kingfisher (KGF) 304.40p 1.81%
Associated British Foods (ABF) 2,895.00p 1.61%
Next (NXT) 3,729.00p 1.52%
SEGRO (SGRO) 502.00p 1.50%
TUI AG Reg Shs (DI) (TUI) 1,168.00p 1.48%
Hammerson (HMSO) 588.00p 1.20%

FTSE 100 - Fallers

Rio Tinto (RIO) 3,413.00p -1.71%
International Consolidated Airlines Group SA (CDI) (IAG) 614.00p -1.52%
Anglo American (AAL) 1,117.00p -1.19%
easyJet (EZJ) 1,415.00p -1.12%
British American Tobacco (BATS) 5,248.00p -1.07%
Smiths Group (SMIN) 1,606.00p -1.05%
BHP Billiton (BLT) 1,309.00p -1.02%
Glencore (GLEN) 317.65p -0.98%
Sage Group (SGE) 669.00p -0.96%
Wolseley (WOS) 4,623.00p -0.90%

FTSE 250 - Risers

Carillion (CLLN) 75.45p 12.78%
IG Group Holdings (IGG) 604.50p 8.92%
QinetiQ Group (QQ.) 274.50p 4.14%
Dairy Crest Group (DCG) 577.00p 3.59%
Ascential (ASCL) 338.70p 3.39%
Petra Diamonds Ltd.(DI) (PDL) 106.40p 2.90%
Sanne Group (SNN) 675.00p 2.90%
TBC Bank Group (TBCG) 1,675.00p 2.82%
CLS Holdings (CLI) 207.80p 2.82%
NMC Health (NMC) 2,255.00p 2.55%

FTSE 250 - Fallers

Melrose Industries (MRO) 232.50p -3.33%
Acacia Mining (ACA) 279.80p -2.37%
Wizz Air Holdings (WIZZ) 2,559.00p -2.03%
Entertainment One Limited (ETO) 232.00p -1.86%
Lancashire Holdings Limited (LRE) 721.50p -1.77%
Stagecoach Group (SGC) 179.60p -1.75%
Vedanta Resources (VED) 744.00p -1.65%
Hikma Pharmaceuticals (HIK) 1,375.00p -1.65%
Wood Group (John) (WG.) 612.00p -1.53%
Mitie Group (MTO) 275.00p -1.47%