London midday: Stocks pop higher as investors digest inflation reading

London stocks had popped into the black by midday on Wednesday as data showed that annual consumer price inflation eased to the Bank of England’s 2% target in May, but services inflation remained high.

The FTSE 100 was up 0.1% at 8,174.97, reversing earlier losses, while sterling was up 0.2% against the dollar at 1.2735.

Inflation was down from 2.3% in April, according to figures released earlier by the Office for National Statistics, in line with expectations. It marked the first time inflation has hit the Bank of England’s target since July 2021.

Inflation peaked at 11.1% in October 2022, hitting its highest level since 1981.

The largest downward contributions came from food and non-alcoholic beverages, recreation and culture, and furniture and household goods. The largest upward contribution was from transport.

The data showed that prices for food and non-alcoholic drinks rose 1.7%, down from 2.9% in April. This marked the lowest annual rate since October 2021. The ONS said the rate has eased for the 14th month in a row from a recent high of 19.2% in March 2023, which was the highest annual rate in more than 45 years.

However, services inflation fell to 5.7% in May from 5.9% a month earlier, missing expectations for a drop to 5.5%. This raised expectations that a rate cut from the BoE might not come until September, rather than August as previously forecast.

Meanwhile, core inflation - which strips out food, energy, alcohol and tobacco - eased to 3.5% from 3.9%, as expected.

The inflation data comes a day before the Bank of England is due to make its latest policy announcement.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "UK inflation finally hitting target may come as relief for companies and consumers, but given this descent was widely expected it’s not moved the dial much for London-listed stocks.

"The FTSE 100 has opened lower as investors digest the inflation reading which shows prices in the services sector remain hot, indicating a rate cut may not come until the Autumn. Fed policymakers are also staying cautious about the prospects for interest rate cuts."

In equity markets, paper and packaging group Smurfit Kappa pushed up after S&P Dow Jones Indices said on Tuesday that Smurfit WestRock - the new company formed through the merger of Smurfit and WestRock - would be included in its indices. DS Smith and Mondi also gained.

Vodafone rose after saying it had raised €1.7bn through the sale of an 18% interest in Indus Towers in an accelerated bookbuild.

Warhammer maker Games Workshop rallied after saying it expects a jump in annual pre-tax profits to at least £200m compared to £171m a year earlier.

JTC advanced after saying late on Tuesday that it had agreed to buy FFP, a provider of specialist fiduciary services, for up to $110m.

On the downside, housebuilder Berkeley slumped despite lifting its earnings outlook for the current financial year by 5% and unveiling plans to enter the London rental market.

Precision instrumentation and controls group Spectris tanked as it warned full-year profits will be at the bottom end of market forecasts as a result of weaker-than-expected demand at its lab equipment division in the first half. The news came as the company announced the appointment of Royal Mail’s chief financial officer Angela Noon as its new CFO.

Helios Towers was under the cosh after Newlight and RIT sold a combined 37.6m shares in the company in placing at 115p each, raising about £43.2m. This marked their first sale since the company’s IPO in 2019.

Market Movers

FTSE 100 (UKX) 8,197.83 0.08%
FTSE 250 (MCX) 20,441.80 0.16%
techMARK (TASX) 4,789.38 -0.32%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 3,732.00p 4.30%
Anglo American (AAL) 2,444.00p 2.30%
Smith (DS) (SMDS) 357.40p 2.00%
Vodafone Group (VOD) 72.02p 1.95%
Beazley (BEZ) 693.50p 1.84%
Glencore (GLEN) 459.75p 1.39%
Mondi (MNDI) 1,493.50p 1.36%
International Consolidated Airlines Group SA (CDI) (IAG) 170.00p 1.16%
easyJet (EZJ) 456.90p 1.06%
JD Sports Fashion (JD.) 119.00p 0.98%

FTSE 100 - Fallers

Berkeley Group Holdings (The) (BKG) 4,860.00p -2.99%
Persimmon (PSN) 1,370.00p -2.46%
SEGRO (SGRO) 899.60p -2.09%
Spirax Group (SPX) 8,475.00p -2.08%
Taylor Wimpey (TW.) 144.85p -1.73%
Barratt Developments (BDEV) 473.60p -1.72%
Halma (HLMA) 2,615.00p -1.54%
AstraZeneca (AZN) 12,260.00p -1.26%
Scottish Mortgage Inv Trust (SMT) 887.40p -1.07%
B&M European Value Retail S.A. (DI) (BME) 469.40p -0.84%

FTSE 250 - Risers

Games Workshop Group (GAW) 10,170.00p 7.79%
JTC (JTC) 949.00p 5.56%
IP Group (IPO) 47.00p 3.52%
CMC Markets (CMCX) 277.50p 3.16%
Drax Group (DRX) 518.00p 2.47%
Endeavour Mining (EDV) 1,686.00p 2.31%
Wizz Air Holdings (WIZZ) 2,354.00p 2.26%
Rathbones Group (RAT) 1,746.00p 2.11%
Harbour Energy (HBR) 302.90p 2.09%
Hiscox Limited (DI) (HSX) 1,153.00p 1.86%

FTSE 250 - Fallers

Spectris (SXS) 2,986.00p -6.92%
Helios Towers (HTWS) 115.00p -6.66%
Renishaw (RSW) 4,010.00p -2.79%
SSP Group (SSPG) 161.70p -2.00%
Bellway (BWY) 2,548.00p -1.55%
Wetherspoon (J.D.) (JDW) 741.50p -1.33%
Bankers Inv Trust (BNKR) 111.40p -1.24%
AO World (AO.) 107.40p -1.10%
Bank of Georgia Group (BGEO) 3,795.00p -1.04%
Ferrexpo (FXPO) 43.00p -1.04%