London open: Property stocks lift markets as UK inflation falls

The FTSE 100 rose on Wednesday morning as an unexpected drop in UK core inflation raised hopes that tomorrow's anticipated interest-rate hike by the Bank of England would be its last in the current cycle.

Housebuilders and real estate stocks rose strongly on the news, with higher rates having hammered bottom lines and property valuations over the past year. Shortly after the open, London's benchmark index was up 0.5% at 7,701.

FOMC and BoE in focus

The Bank of England meets on Thursday and is widely expected to hike interest rates by a further 25 basis points to 5.5%, but a downside surprise in UK inflation data for August could prevent policymakers from further tightening beyond September.

The year-on-year change in the consumer price index eased to 6.7% last month, from 6.8% in July and surprising economists who had forecast a slight tick-up to 7.1%. Core inflation dropped to 6.2% in August, from 6.9% the month before – this is still more than three times the BoE's target but a strong step in the right direction and well below the 6.8% reading expected.

"What [the data] does support is the recent market pricing favouring a one-and-done hike in September and no more thereafter," said Neil Wilson, analyst at Markets.com. "With the Fed about to pause and the ECB signalling it thinks it is done with hiking, the BoE won’t want to be the outlier."

Meanwhile, the Federal Open Market Committee meeting kicked off on Tuesday afternoon and will conclude later today – though the policy decision and statement will not come out before the closing bell in London.

"A pause is still widely expected but it’s going to be the accompanying commentary which will set the tone, with investors on tenterhooks about what the Fed’s next steps will be and when cuts will be on the agenda," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Pearson tanks on CEO exit

Shares in educational publisher Pearson dropped nearly 5% after the company announced the exit of its chief executive Andy Bird. Bird joined as Pearson's boss in October 2020 from Walt Disney, and the stock has jumped by nearly two thirds under his leadership. Pearson said that Microsoft executive Omar Abbosh would take Bird's place in early 2024 as he retires.

Property stocks were hot early on after the surprise drop in UK inflation, with Taylor Wimpey, Barratt Developments, Berkeley, Land Securities, SEGRO and Rightmove among the best performers on the FTSE 100. FTSE 250 peers Persimmon, Redrow and Bellway were also putting in decent gains.

Global investment manager M&G was in demand after posting stronger-than-expected interim profits. Adjusted operating profits came in at £390m (consensus: £284m) as the firm said it was on track to meet its 2024 operating capital generation target of £2.5bn.

Market Movers

FTSE 100 (UKX) 7,700.90 0.53%
FTSE 250 (MCX) 18,674.43 1.34%
techMARK (TASX) 4,380.15 0.77%

FTSE 100 - Risers

Taylor Wimpey (TW.) 121.60p 5.46%
Barratt Developments (BDEV) 465.00p 4.61%
Berkeley Group Holdings (The) (BKG) 4,211.00p 3.82%
Land Securities Group (LAND) 605.00p 3.81%
B&M European Value Retail S.A. (DI) (BME) 575.80p 3.41%
M&G (MNG) 205.80p 3.21%
SEGRO (SGRO) 743.20p 3.02%
Rightmove (RMV) 558.00p 2.20%
Unite Group (UTG) 920.50p 1.99%
AstraZeneca (AZN) 10,820.00p 1.92%

FTSE 100 - Fallers

Pearson (PSON) 843.80p -4.55%
BP (BP.) 520.50p -0.82%
BAE Systems (BA.) 1,051.50p -0.71%
Shell (SHEL) 2,596.50p -0.63%
Associated British Foods (ABF) 2,072.00p -0.62%
Weir Group (WEIR) 1,889.50p -0.45%
Melrose Industries (MRO) 493.10p -0.36%
Rio Tinto (RIO) 5,211.00p -0.34%
WPP (WPP) 762.60p -0.31%
Pershing Square Holdings Ltd NPV (PSH) 2,984.00p -0.27%

FTSE 250 - Risers

Supermarket Income Reit (SUPR) 79.50p 6.00%
Persimmon (PSN) 1,106.50p 5.73%
Bellway (BWY) 2,280.00p 5.56%
Redrow (RDW) 519.50p 5.25%
British Land Company (BLND) 325.30p 5.24%
Great Portland Estates (GPE) 422.80p 4.91%
Derwent London (DLN) 1,935.00p 4.14%
Travis Perkins (TPK) 836.20p 4.00%
Vistry Group (VTY) 956.00p 3.97%
Tritax Big Box Reit (BBOX) 143.40p 3.91%

FTSE 250 - Fallers

NCC Group (NCC) 102.00p -2.86%
Vesuvius (VSVS) 432.40p -2.35%
Games Workshop Group (GAW) 10,500.00p -1.59%
IP Group (IPO) 58.00p -1.19%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 451.00p -0.44%
Ithaca Energy (ITH) 172.50p -0.29%
Bank of Georgia Group (BGEO) 3,720.00p -0.27%
NextEnergy Solar Fund Limited Red (NESF) 87.70p -0.23%
Witan Inv Trust (WTAN) 228.00p -0.22%
Pantheon International (PIN) 292.00p -0.17%