London close: Stocks fall as sterling rallies on rate hike expectations

The FTSE 100 ended down 0.5% at 7,291.20, while the pound was 0.4% higher versus the dollar and the euro at 1.3480 and 1.1909, respectively.

Data released earlier by the Office for National Statistics showed that consumer price inflation rose to 4.2% in October from 3.1% the month before, hitting its highest level in a decade as energy and fuel costs rose, and coming in above expectations of 3.9%. It marked the highest level since November 2011 and was well above the Bank of England’s 2% target.

The ONS said the "main upward pressure" came from electricity, gas and other fuels after the energy cap was increased by 12% in October. Restaurants and hotels, education, furniture and household goods, and food and non-alcoholic beverages also contributed.

Core CPI inflation - which strips out volatile elements such as food and fuel - rose to 3.4% in October from 2.9% the month before and versus expectations of 3.1%.

ONS chief economist Grant Fitzner said: "Inflation rose steeply in October to its highest rate in nearly a decade. This was driven by increased household energy bills due to the price cap hike, a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels.

"Costs of goods produced by factories and the price of raw materials have also risen substantially, and are now at their highest rates for at least 10 years."

Joshua Mahony, senior market analyst at IG, said: "Morning data out of the UK saw inflation push higher once again, with increases across all three readings (CPI, PPI, and RPI) serving to highlight how widespread the price pressures have spread.

"Coming off the back of a 14-month low in unemployment, today’s 10-year high inflation reading builds a renewed story around potential action at the Bank of England. Despite Bailey & co failing to pull the trigger this month, we find ourselves back in the same position with markets now pricing a 60% chance of a December rate hike."

In equity markets, Spirax-Sarco slumped as it maintained overall guidance but flagged supply issues.

SSE fell even as the energy company reported a rise in interim profit as its gas storage operation helped to offset a fall in renewables earnings. It also announced an investment of £12.5bn in renewables, funded by the sale of a 25% stake in its electricity grid assets, which it plans to use over the next five years.

CMC Markets Michael Hewson said: "The company has been under pressure from activist investor Elliott Investment to spin off its renewables business to improve value to shareholders, however management have pushed back on that, saying that there needs to be an element of crossover between the businesses. This may well have prompted some disappointment, in what could be construed as a halfway house process."

Experian was weaker despite upgrading its full-year guidance as the consumer data group reported strong growth in a first half boosted by markets reopening from the pandemic.

CMC Markets slid as the online trading platform reiterated its full-year guidance but reported a decline in first-half profit amid subdued market volatility.

Marks & Spencer was knocked lower by a downgrade to ‘hold’ from ‘buy’ at Jefferies.

On the upside, Sage gained even as the software group said annual operating profits fell 10% as margins were squeezed.

Market Movers

FTSE 100 (UKX) 7,291.20 -0.49%
FTSE 250 (MCX) 23,434.07 -0.45%
techMARK (TASX) 4,589.21 0.29%

FTSE 100 - Risers

Sage Group (SGE) 800.00p 9.74%
Aveva Group (AVV) 3,459.00p 2.92%
Smiths Group (SMIN) 1,507.50p 2.90%
Glencore (GLEN) 371.95p 2.27%
Fresnillo (FRES) 986.80p 1.82%
Auto Trader Group (AUTO) 723.60p 1.69%
Rightmove (RMV) 745.20p 1.47%
Anglo American (AAL) 2,877.50p 1.27%
Compass Group (CPG) 1,541.50p 0.98%
Polymetal International (POLY) 1,513.00p 0.97%

FTSE 100 - Fallers

London Stock Exchange Group (LSEG) 6,678.00p -5.86%
Spirax-Sarco Engineering (SPX) 16,165.00p -4.94%
SSE (SSE) 1,592.00p -3.98%
Experian (EXPN) 3,373.00p -3.96%
International Consolidated Airlines Group SA (CDI) (IAG) 154.58p -3.44%
Vodafone Group (VOD) 114.18p -3.17%
Informa (INF) 507.00p -2.95%
Taylor Wimpey (TW.) 152.90p -2.55%
Rolls-Royce Holdings (RR.) 140.44p -2.42%
Smurfit Kappa Group (CDI) (SKG) 3,881.00p -2.22%

FTSE 250 - Risers

Hammerson (HMSO) 32.50p 4.43%
Indivior (INDV) 241.80p 4.22%
Syncona Limited NPV (SYNC) 213.50p 2.89%
Caledonia Investments (CLDN) 3,850.00p 2.67%
Renishaw (RSW) 5,235.00p 2.55%
Diversified Energy Company (DEC) 107.20p 2.29%
Pagegroup (PAGE) 668.50p 2.14%
Petropavlovsk (POG) 23.56p 2.08%
Pantheon International (PIN) 335.00p 2.01%
Spire Healthcare Group (SPI) 246.00p 1.86%

FTSE 250 - Fallers

CMC Markets (CMCX) 243.00p -10.50%
Bridgepoint Group (Reg S) (BPT) 523.00p -7.43%
Wizz Air Holdings (WIZZ) 4,430.00p -4.67%
Restaurant Group (RTN) 88.30p -4.64%
WH Smith (SMWH) 1,554.00p -4.34%
Baltic Classifieds Group (BCG) 203.00p -3.33%
TP Icap Group (TCAP) 139.08p -3.31%
Trustpilot Group (TRST) 306.60p -3.22%
Crest Nicholson Holdings (CRST) 334.00p -2.68%
Molten Ventures (GROW) 954.00p -2.65%