London open: Stocks slide amid US debt ceiling impasse, after inflation print

London stocks fell sharply in early trade on Wednesday, with US debt ceiling talks still firmly in focus as Republicans and the White House struggle to make any headway, and as investors mulled a higher-than-expected UK inflation reading.

At 0830 BST, the FTSE 100 was down 1% at 7,682.26.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said "positive sentiment is being restrained by shackles of uncertainty as the US debt ceiling negotiations continue without agreement".

"President Joe Biden and House Republican Speaker Kevin McCarthy need to find compromise on taxes and spending but are conscious any deal needs also to garner the support of congressional colleagues to pass," she said.

On home shores, figures from the Office for National Statistics showed that inflation fell less than expected in April and food prices remained near record highs.

Consumer price inflation declined to 8.7% from 10.1% in March, versus expectations for a fall to 8.2%. Nevertheless, it was the first time consumer price inflation came in below 10% since August last year, as energy prices eased off their highs. Inflation is now at its lowest level since March 2022.

The ONS said electricity and gas prices contributed 1.42 percentage points to the fall in annual inflation as last April’s rise dropped out of the annual comparison.

Food inflation remained close to its highest level in 45 years, however, at 19.1% in April, down just a touch from 19.2% the month before.

Core inflation, which strips out energy, food, alcohol and tobacco, rose to 6.8% in April from 6.2% in March, marking the highest rate since March 1992.

Capital Economics said the smaller-than-expected fall in CPI inflation "means it is now very hard to imagine the Bank of England not raising interest rates from 4.50% to 4.75% in June".

In equity markets, housebuilders tumbled, with Taylor Wimpey, Persimmon, Barratt and Vistry all down.

B&Q and Castorama owner Kingfisher was weaker as it backed its full-year guidance but posted a decline in first-quarter sales, hit by poor weather in the UK and France.

Promotional products marketer 4imprint Group lost ground as it said trading was in line with expectations, but warned rises in order activity would moderate over the rest of the year.

On the upside, Intertek gained after the testing company held annual guidance as revenues rose 11% in the first four months of the year.

SSE was also up as it reported a rise in full-year profit and announced plans to invest up to £40bn over the next decade on clean energy projects.

Retailer Marks & Spencer surged as it delivered a forecast-busting annual profit driven by a major improvement in its food division and said it would reinstate a "modest" dividend in November.

Adjusted pre-tax profit came in at £482m, down from £522m last year, but better than expectations of £431m. The prior year’s figure was also boosted by almost £60m in business rate relief.

Market Movers

FTSE 100 (UKX) 7,682.26 -1.04%
FTSE 250 (MCX) 19,019.44 -0.98%
techMARK (TASX) 4,632.40 -1.02%

FTSE 100 - Risers

Intertek Group (ITRK) 4,285.00p 2.22%
SSE (SSE) 1,902.00p 1.74%
BT Group (BT.A) 148.85p 0.24%
F&C Investment Trust (FCIT) 873.00p 0.00%
Pershing Square Holdings Ltd NPV (PSH) 2,712.00p 0.00%
Unite Group (UTG) 902.50p 0.00%
Airtel Africa (AAF) 117.20p 0.00%
Admiral Group (ADM) 2,297.00p -0.13%
3i Group (III) 1,921.50p -0.18%
Tesco (TSCO) 267.60p -0.19%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 118.10p -4.06%
Persimmon (PSN) 1,240.50p -3.54%
Prudential (PRU) 1,132.00p -3.33%
Barratt Developments (BDEV) 479.90p -3.03%
Smith & Nephew (SN.) 1,232.50p -2.88%
Rolls-Royce Holdings (RR.) 149.15p -2.64%
SEGRO (SGRO) 803.60p -2.62%
Aviva (AV.) 412.90p -2.57%
Burberry Group (BRBY) 2,202.00p -2.48%
Phoenix Group Holdings (PHNX) 567.80p -2.37%

FTSE 250 - Risers

Marks & Spencer Group (MKS) 176.20p 7.70%
Vanquis Banking Group 20 (VANQ) 234.00p 3.08%
Helios Towers (HTWS) 98.00p 2.78%
Energean (ENOG) 1,161.00p 1.04%
Dechra Pharmaceuticals (DPH) 3,200.00p 0.95%
Barr (A.G.) (BAG) 520.00p 0.58%
Wood Group (John) (WG.) 140.90p 0.43%
Harbour Energy (HBR) 244.90p 0.41%
Drax Group (DRX) 636.60p 0.25%
Cranswick (CWK) 3,316.00p 0.18%

FTSE 250 - Fallers

LondonMetric Property (LMP) 179.80p -4.36%
Carnival (CCL) 767.20p -3.93%
ASOS (ASC) 439.00p -3.47%
Darktrace (DARK) 291.20p -2.71%
Redrow (RDW) 511.50p -2.66%
Vistry Group (VTY) 769.00p -2.66%
Tritax Big Box Reit (BBOX) 142.50p -2.60%
Pennon Group (PNN) 781.00p -2.38%
TUI AG Reg Shs (DI) (TUI) 535.60p -2.30%
Edinburgh Worldwide Inv Trust (EWI) 147.20p -2.26%