London open: Stocks fall as China inflation slows

London stocks declined on Thursday as China inflation slowed more than expected in May.

China’s consumer price index rose 2.0% year-on-year in May, down from 2.3% growth the previous month, as food prices fell. Analysts had pencilled in a 2.2% increase.

The producer price index remained stuck in negative territory for the 51st straight month, falling 2.8% in May from a year ago, compared to April’s 3.4% dip and analysts’ estimates for a 3.2% decline.

Capital Economics said it expects consumer price inflation to remain near current levels for the rest of the year.

“Admittedly, we expect non-food inflation to rise as the drop in oil prices during the second half of 2015 provides a weaker base for comparison,” said Julian Evans-Pritchard, China economist at Capital Economics.

“In contrast, we anticipate a further recovery in producer price inflation in the coming quarters as commodity price deflation continues to ease, with a return to positive territory by the end of year now looking likely.”

Still to come, UK trade data at 0930 BST, US initial jobless claims at 1330 BST and US wholesale inventories at 1500 BST.

Meanwhile, oil prices will continue to be monitored after Brent and West Texas Intermediate closed above the $50 a barrel mark on Wednesday following government data which showed a drop in US weekly crude inventories.

The Energy Information Administration said crude inventories fell 3.2 million barrels in the week to June 3, compared with analysts' expectations for a decrease of 2.7 million barrels.

At 0853 BST Brent crude fell 0.21% to $52.40 per barrel and West Texas Intermediate increased 0.07% to $51.27 per barrel.

In company news, Home Retail Group gained after saying first quarter sales at its Argos chain grew by 2.6% to £868m with net new space contributing 2.5%, mainly as a result of store openings in the previous financial year. Like-for-like sales grew by 0.1%, although the company said the “cannibalisation impact from the new space added in the previous financial year was around 1% and therefore Argos' underlying like-for-like sales increased by approximately 1%”.

Vodafone slid after it confirmed local rumours surrounding its New Zealand operation, announcing it was merging with local subscription television provider Sky to create an integrated telecommunications and media group. Sky shares advanced.

Housebuilders were in the red after the Royal Institution of Chartered Surveyors said house prices are expected to fall over the next few months amid uncertainty over the European Union referendum and higher taxes on buy-to-let and second home purchases. Taylor Wimpey, Berkeley Group and Bellway slumped.

Essentra, supplier of speciality plastic and packaging components, dropped after warning of lower full year adjusted operating profit amid challenging market conditions in filter products and project delays.

Market Movers

FTSE 100 (UKX) 6,253.17 -0.77%
FTSE 250 (MCX) 17,083.30 -0.55%
techMARK (TASX) 3,102.93 -0.77%

FTSE 100 - Risers

Sainsbury (J) (SBRY) 252.90p 0.92%
Paddy Power Betfair (PPB) 9,430.00p 0.59%
Sky (SKY) 933.00p 0.48%
BT Group (BT.A) 424.00p 0.45%
Tesco (TSCO) 161.05p 0.31%
Informa (INF) 669.00p 0.22%
Marks & Spencer Group (MKS) 376.10p 0.16%
Morrison (Wm) Supermarkets (MRW) 188.90p 0.16%
Rexam (REX) 638.00p 0.16%
Carnival (CCL) 3,356.00p 0.15%

FTSE 100 - Fallers

Vodafone Group (VOD) 221.05p -4.31%
Antofagasta (ANTO) 433.20p -4.10%
Taylor Wimpey (TW.) 182.80p -3.33%
Berkeley Group Holdings (The) (BKG) 3,132.00p -3.30%
Johnson Matthey (JMAT) 2,985.00p -3.18%
Rolls-Royce Holdings (RR.) 593.00p -3.03%
Anglo American (AAL) 682.60p -2.14%
Persimmon (PSN) 1,982.00p -2.08%
Barratt Developments (BDEV) 555.50p -2.03%
BHP Billiton (BLT) 884.60p -1.82%

FTSE 250 - Risers

Kaz Minerals (KAZ) 163.30p 5.35%
Indivior (INDV) 218.20p 3.90%
Aveva Group (AVV) 1,725.00p 1.95%
Ophir Energy (OPHR) 76.05p 1.88%
RPC Group (RPC) 829.50p 1.72%
Auto Trader Group (AUTO) 409.00p 1.61%
Acacia Mining (ACA) 353.90p 1.40%
IP Group (IPO) 168.60p 1.38%
DFS Furniture (DFS) 297.00p 1.33%
Aberforth Smaller Companies Trust (ASL) 1,057.00p 1.15%

FTSE 250 - Fallers

Essentra (ESNT) 601.00p -27.59%
esure Group (ESUR) 275.00p -4.35%
B&M European Value Retail S.A. (DI) (BME) 282.60p -4.17%
Petrofac Ltd. (PFC) 757.00p -3.32%
Bellway (BWY) 2,607.00p -2.47%
Booker Group (BOK) 176.00p -2.28%
Cineworld Group (CINE) 560.50p -2.01%
G4S (GFS) 186.80p -1.99%
Allied Minds (ALM) 328.00p -1.97%
Bovis Homes Group (BVS) 963.00p -1.83%