London open: FTSE falls as shop price inflation hits new high

London stocks fell in early trade on Wednesday as investors continued to fret about inflation and an economic slowdown.

At 0900 BST, the FTSE 100 was down 0.3% at 7,341.48.

Richard Hunter, head of markets at Interactive Investor, said: "Market malaise rumbled on as investors grappled with the likelihood of higher interest rates for longer than had been hoped.

"Further comments from a Federal Reserve official suggested that not only should rates in the US rise above 3.5% this year, but any cuts next year were also unlikely. This was followed by the JOLTS report on job openings, reportedly a measure of interest to the Fed, which highlighted extremely tight labour conditions. With the non-farm payrolls to come at the end of the week, any further strength would underline the Fed’s resolve to plough on with aggressive tightening against a backdrop of an economy which seems for the moment relatively unaffected by the hikes so far."

Investors were mulling over the latest data out of China, with the official manufacturing purchasing managers’ index rising to 49.4 in August from 49.0 in July. This was above consensus expectations of 49.2 but remained below the 50.0 mark that separates contraction from expansion.

Meanwhile, the non-manufacturing PMI fell to 52.6 from 53.8, versus consensus expectations for a reading of 52.3.

On home shores, figures released earlier by the British Retail Consortium and NielsenIQ showed that shop price inflation hit a new high in August as the war in Ukraine pushed up the cost of food.

Shop price inflation jumped to 5.1% from 4.1% in July, marking a new record for the measure since the index started in 2005. Meanwhile, fresh food price inflation rose to 10.5% in August from 8% a month earlier, hitting its highest level since the global financial crisis in September 2008.

BRC chief executive Helen Dickinson said: "Mounting cost pressures up and down supply chains meant shop price inflation hit a new high in August. The war in Ukraine, and consequent rise in the price of animal feed, fertiliser, wheat and vegetable oils continued to push up food prices. Fresh food inflation in particular, surged to its highest level since 2008, and products such as milk, margarine and crisps saw the biggest rises.

"The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 18% in 2023. The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials, and raising staff pay. However, as retailers also grapple with growing cost pressures, there is only so much they can shoulder."

Corporate news was thin on the ground.

Anglo American was in focus after it said the value of rough diamond sales at its De Beers unit dipped to $630m in the seventh cycle of the year from $638m in the sixth. However, the value was up from $522m in the seventh cycle of last year.

Outside the FTSE 350, Shoes Zone rallied after it upgraded its full-year profit guidance, highlighting strong demand. The shoe retailer said that since its update in late July, trading has continued to exceed expectations thanks to strong demand for summer and back to school products in August.

Cake Box shares tanked, however, after the cream cakes retailer warned on profits, citing a "significantly more challenging" trading environment.

Market Movers

FTSE 100 (UKX) 7,341.48 -0.27%
FTSE 250 (MCX) 19,082.91 -0.35%
techMARK (TASX) 4,315.42 -0.50%

FTSE 100 - Risers

Imperial Brands (IMB) 1,913.00p 1.86%
Anglo American (AAL) 2,833.00p 1.67%
Kingfisher (KGF) 235.40p 1.16%
Mondi (MNDI) 1,476.00p 1.03%
Harbour Energy (HBR) 475.30p 0.96%
Lloyds Banking Group (LLOY) 44.15p 0.91%
Smurfit Kappa Group (CDI) (SKG) 2,895.00p 0.87%
Glencore (GLEN) 487.75p 0.79%
Standard Chartered (STAN) 598.60p 0.77%
Intermediate Capital Group (ICP) 1,368.50p 0.77%

FTSE 100 - Fallers

National Grid (NG.) 1,103.50p -1.87%
Rolls-Royce Holdings (RR.) 77.00p -1.53%
GSK (GSK) 1,380.60p -1.44%
AstraZeneca (AZN) 10,814.00p -1.42%
SEGRO (SGRO) 949.80p -1.41%
Hargreaves Lansdown (HL.) 825.20p -1.39%
Haleon (HLN) 255.65p -1.37%
Croda International (CRDA) 6,742.00p -1.35%
Bunzl (BNZL) 2,885.00p -1.33%
DCC (CDI) (DCC) 4,979.00p -1.25%

FTSE 250 - Risers

Blackrock Throgmorton Trust (THRG) 583.00p 2.10%
Morgan Advanced Materials (MGAM) 274.00p 2.05%
Moonpig Group (MOON) 201.00p 1.98%
ITV (ITV) 64.32p 1.77%
WH Smith (SMWH) 1,424.00p 1.71%
Virgin Money UK (VMUK) 150.35p 1.69%
Polymetal International (POLY) 212.40p 1.14%
Serco Group (SRP) 178.30p 1.13%
Grafton Group Ut (CDI) (GFTU) 730.50p 1.11%
Bankers Inv Trust (BNKR) 105.00p 0.96%

FTSE 250 - Fallers

Drax Group (DRX) 643.00p -4.10%
Synthomer (SYNT) 194.70p -3.52%
Tritax Big Box Reit (BBOX) 167.20p -2.90%
XP Power Ltd. (DI) (XPP) 1,900.00p -2.86%
Ascential (ASCL) 201.80p -2.79%
LondonMetric Property (LMP) 219.20p -2.75%
Indivior (INDV) 290.40p -2.75%
Games Workshop Group (GAW) 7,110.00p -2.07%
Jupiter Fund Management (JUP) 97.60p -2.01%
Great Portland Estates (GPE) 502.50p -1.95%