London close: Stocks fall ahead of key inflation reading

The FTSE 100 fell 0.09% to close at 8,416.45 points, while the FTSE 250 saw a larger decline of 0.43%, ending the day at 20,783.37.

In currency markets, sterling was last up 0.03% on the dollar to trade at $1.2710, while it increased 0.04% against the euro, changing hands at €1.1708.

“Following a weak session in Asia, European stock indices mainly drifted lower as well, as several Fed speakers voiced their dissatisfaction with sticky US inflation, despite the better-than-expected April print,” said IG senior market analyst Axel Rudolph.

“In Canada, however, inflation dropped to a three-year low, in line with expectations.

“German producer prices slipping more than expected, a speech by the ECB President Christine Lagarde and a larger-than-expected eurozone trade surplus didn't manage to prop up European stocks, while the FTSE 100 flat-lined.”

Rudolph added that the price of gold slipped back from its Monday record high around the $2,450 per troy ounce mark, while silver prices came off their 11-and-a-quarter year highs with the copper squeeze also taking a breather.

“The price of zinc continues its ascent, though, while that of crude oil took a hit, even if recovering from its sharp intraday losses ahead of US API inventory data.”

IMF revises UK growth forecast upwards, grocery price inflation slows

In economic news, the International Monetary Fund (IMF) revised its growth forecast for the UK, predicting a “soft landing” with a faster-than-expected recovery following last year's mild recession.

The IMF now expected the UK’s gross domestic product (GDP) to grow by 0.7% in 2024, up from its previous estimate of 0.5%.

Growth was projected to strengthen to 1.5% in 2025 as real incomes benefit from slowing inflation and easing financial conditions.

Despite the improved outlook, the IMF emphasised the need for urgent structural reforms to improve living standards, particularly ahead of the upcoming general election.

Concerns were raised about the UK’s longer-term economic prospects, citing weak labour productivity and higher-than-expected inactivity levels due to illness.

The IMF criticised recent cuts to national insurance contributions, describing them as fiscally costly mistakes, and warned of “difficult choices” regarding taxes and spending to stabilise public debt, which is projected to rise towards 97% of GDP.

Elsewhere, UK grocery price inflation fell to 2.4% in the four weeks ended 12 May - the lowest level since October 2021, according to Kantar.

That was down from 3.2% in the previous period, with take-home grocery sales rising by 2.9%.

“Typically, an inflation rate of around 3% is when we start to see marked changes in consumers’ behaviour, with shoppers trading down to cheaper items when the rate goes above this line and vice versa when the rate drops,” said Fraser McKevitt, head of retail and consumer insight at Kantar.

“However, after nearly two and a half years of rapidly rising prices, it could take a bit longer for shoppers to unwind the habits they have learnt to help them manage the cost of living crisis.

“Own-label lines are proving resilient, for example, and they are still growing faster than brands, making up over half - 52% - of total spending.”

On the continent, eurozone construction output rose marginally by 0.1% in March, with a significant downward revision of February’s increase to 0.4% from 1.8%, according to Eurostat.

Compared to the prior year, output was stable, while the output of building construction fell by 1.5%, and civil engineering and specialised construction activities each rose by 0.6%.

Finally on data, Germany's wholesale price deflation accelerated in April, with the producer price index falling 3.3% annually, marking the 10th consecutive month of decline and exceeding the forecasted 3.2% drop, according to Destatis.

Investors were now looking to speeches from several Federal Reserve officials, and a speech by Bank of England Governor Andrew Bailey at 1800 BST, alongside Wednesday’s UK inflation data.

Water companies follow Pennon lower, AstraZeneca in the green

On London’s equity markets, Fresnillo shares fell 1.17% after the precious metals miner reported increased silver production and gold output in line with guidance, despite the nearing end of the Noche Buena mine.

However, its gross profit took a hit in 2023, impacting investor sentiment.

Pennon Group dropped 5.08% after the South West Water owner slashed its dividend by £2.4m following a record fine for illegally dumping sewage into rivers and the sea.

That also affected United Utilities Group and Severn Trent, which fell by 0.69% and 0.89%, respectively.

SSP Group saw a sharp decline of 9%, after the Upper Crust and Ritazza owner reinstated its interim dividend but reported a drop in first-half profits, disappointing investors.

Cranswick declined 0.9% despite reporting a jump in full-year profit and revenue, while Kingfisher retreated 0.65% after the B&Q owner reported that first-quarter like-for-like sales were down on last year due to weakness in France, although full-year expectations remained unchanged.

Assura fell 1.08% even after the specialist healthcare property investor and developer reported a rise in full-year net rental income and announced a strategic £250m joint venture with the Universities Superannuation Scheme (USS).

On the upside, AstraZeneca added 2.28% after the pharmaceutical giant laid out ambitious plans to reach $80bn in revenue by 2030.

Self-storage operator Big Yellow Group rallied 4.92% after it posted robust revenue growth and increased profitability in its full-year results late on Monday.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,416.45 -0.09%
FTSE 250 (MCX) 20,783.37 -0.43%
techMARK (TASX) 4,857.72 1.00%

FTSE 100 - Risers

Schroders (SDR) 384.80p 3.89%
AstraZeneca (AZN) 12,364.00p 2.22%
Centrica (CNA) 148.10p 1.30%
Admiral Group (ADM) 2,733.00p 1.30%
BAE Systems (BA.) 1,387.00p 1.09%
Ocado Group (OCDO) 357.60p 0.93%
Antofagasta (ANTO) 2,410.00p 0.71%
Rio Tinto (RIO) 5,825.00p 0.52%
Tesco (TSCO) 311.90p 0.48%
Flutter Entertainment (DI) (FLTR) 16,365.00p 0.34%

FTSE 100 - Fallers

BT Group (BT.A) 127.70p -3.44%
RS Group (RS1) 806.50p -2.71%
JD Sports Fashion (JD.) 120.60p -2.58%
Vodafone Group (VOD) 75.24p -2.49%
Smith (DS) (SMDS) 367.20p -2.34%
easyJet (EZJ) 464.90p -2.11%
Hikma Pharmaceuticals (HIK) 1,932.00p -2.08%
Scottish Mortgage Inv Trust (SMT) 870.80p -2.07%
Airtel Africa (AAF) 119.60p -2.05%
Spirax-Sarco Engineering (SPX) 9,175.00p -1.87%

FTSE 250 - Risers

Big Yellow Group (BYG) 1,238.00p 4.92%
Marshalls (MSLH) 329.50p 3.62%
Hargreaves Lansdown (HL.) 927.00p 3.51%
Safestore Holdings (SAFE) 877.00p 2.75%
Babcock International Group (BAB) 551.50p 2.41%
NCC Group (NCC) 138.20p 2.37%
Direct Line Insurance Group (DLG) 203.80p 2.16%
Quilter (QLT) 113.30p 2.07%
Bytes Technology Group (BYIT) 552.00p 1.94%
Kainos Group (KNOS) 1,270.00p 1.93%

FTSE 250 - Fallers

SSP Group (SSPG) 190.00p -9.00%
Pennon Group (PNN) 679.50p -5.16%
Ascential (ASCL) 330.00p -3.21%
Future (FUTR) 995.00p -3.12%
Mobico Group (MCG) 64.85p -2.99%
Close Brothers Group (CBG) 491.00p -2.96%
Oxford Instruments (OXIG) 2,410.00p -2.82%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 480.50p -2.73%
GCP Infrastructure Investments Ltd (GCP) 75.40p -2.58%
TUI AG Reg Shs (DI) (TUI) 540.50p -2.52%