Sector movers: Homebuilders pace losses after core CPI surprise

Homebuilders were at the bottom of the pile on Wednesday following the release of data showing an unexpected acceleration in core consumer prices.

Those numbers served to push longer-term Gilt yields higher, in turn weighing on the likes of Persimmon, Taylor Wimpey or Barratt Developments.

According to the Office for National Statistics, the annual rate of increase in core CPI picked up from 6.2% for March to 6.8% in April.

Economists had expected the core rate of CPI to repeat at 6.2%.

Headline CPI did slow from 10.1% to 8.7%, but nevertheless came in above the Monetary Policy Committee's forecast for a reading of 8.4%.

In response, economists at Bank of America forecast that Bank would hike interest rates three more times by 25 basis points "until core inflation showed convincing signs of slowing".

BofA expected that to occur in September.

The upside surprise to core CPI was centred on insurance premiums which were continuing to rise "very quickly", said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Tombs did believe that Bank was now odds on to hike again in June.

Nonetheless, his forecasts were calling for headline CPI to slow to 4.0-5.0% in the fourth quarter of 2023, versus the Monetary Policy Committee's own projection of 5.1%.

CPI would slow further, to below the 2% target in mid-2024, he added.

Among other data points to back up his call, Tombs pointed to the likely announcement the next day that household's annualised energy bill would fall to £2,050 from £2,500 at present.

He also referenced multiple survey readings which pointed to an imminent decline in services CPI inflation, as well as the latest producer price figures which showed considerable scope for core goods CPI to fall over coming months.

Life insurers were also under pressure after Aviva released its first quarter trading update.

Michael Hewson, chief market analyst at CMC Markets UK, described it as "strong" but said the firm's 15% decline in wealth flows and the decision to keep its full-year guidance may have underwhelmed investors.

Despite the shift in some analysts' expectations for the Bank of England, Sterling was lower as the US dollar index gained ground amid the debt ceiling standoff and pushed the FTSE 100 to a six-week low.

Top performing sectors so far today

Electricity 11,519.02 +1.17%

Alternative Energy 0.00 0.00%

Alternative Investment Instruments NULL 0.00%

Automobiles and related providers NULL 0.00%

Banking NULL 0.00%

Bottom performing sectors so far today

Life Insurance 6,670.72 -5.21%

Household Goods & Home Construction 11,152.71 -4.46%

Travel & Leisure 7,591.68 -2.98%

Industrial Transportation 3,466.00 -2.70%

Banks 3,586.86 -2.57%