London close: Stocks finish higher as US inflation tops forecasts

The FTSE 100 rose 0.33%, closing at 7,961.21 points, while the FTSE 250 saw an increase of 0.19%, ending the day at 19,801.75 points.

In currency markets, sterling was last down 1.22% on the dollar to trade at $1.2523, while it declined 0.06% against the euro, changing hands at €1.1671.

“Today’s market action isn’t panning out as many hoped - the CPI reading has upended the Fed’s narrative, and now a June move looks even less likely,” said IG chief market analyst Chris Beauchamp.

“US stocks have taken a hit, and the small caps are leading the way to the downside in what is becoming a very risk-off session.

“The Fed will struggle to convince markets that 2024 will still see three rate cuts, since inflation continues to be a very tricky beast to bring under control.”

Beauchamp said the reaction across markets was not universal, however.

“The FTSE 100 dropped on the news, but has rapidly found its footing.

“Faced with such an uncertain outlook for the US, where valuations are much higher, investors continue to find the unloved UK market a compelling destination.”

US consumer inflation beats expectations in March

In economic news, the cost of living in the US rose beyond expectations in March, driven by increases in energy, clothing, and medical care services.

The consumer price index (CPI), as reported by the Bureau of Labor Statistics, rose 0.4% on a seasonally-adjusted basis compared to the prior month.

On a year-on-year basis, CPI jumped 3.5%, marking a significant rise from the 3.2% increase seen in the month before.

Economists had anticipated a more modest 0.3% increase from February, with the annual rate forecast to match the actual figure of 3.5%.

Core CPI, which excludes volatile food and energy prices, also exceeded expectations by rising 0.4% month-on-month, maintaining an annual rate of 3.8%.

“Financial markets are not going to like the above-consensus gain in the headline and core CPI,” said Ryan Sweet, chief US economist at Oxford Economics.

“Some tightening in financial market conditions may do some of the work for the Fed, allowing it to sit on its hands potentially longer than we anticipate.”

Elsewhere, Fitch Ratings downgraded its outlook on China to 'negative', citing growing uncertainties in the country's economic future.

Fitch revised its long-term foreign currency issuer default rating (IDR) to 'negative' from 'stable', affirming the IDR at 'A+'.

The agency highlighted concerns over China's transition from property-dependent growth to a more sustainable model, which has led to increased risks in public finance.

China's fiscal deficits and escalating government debt have depleted fiscal buffers, potentially necessitating a more significant role for fiscal policy in supporting future growth.

The country's economic growth, once robust, had slowed notably in recent years due to factors such as prolonged Covid-related lockdowns and a weakened property sector.

China was aiming for a 5.2% economic growth rate this year, unchanged from 2023 but still one of the lowest in decades.

However, Fitch predicted a further slowdown, estimating growth to reach just 4.5% this year due to persistent weaknesses in the property sector and subdued household consumption.

Tesco finishes higher, real estate stocks fall on US inflation

On London’s equity markets, Tesco jumped 3.3% after the retail giant delivered a confident outlook for the current financial year.

The company reported a substantial increase in annual profits and volumes, with pre-tax profits soaring by 159.5% to £2.76bn.

Housebuilder Vistry Group added 1.03% after announcing two new deals to deliver 1,000 mixed-tenure homes in the Midlands.

Capita climbed 1.72% as the outsourcer extended its customer experience contract with a major European telecoms company.

Direct Line Insurance Group gained 2.05% after appointing a new chief financial officer, while OSB Group saw a 5.03% increase in its share price, continuing its recovery from a recent drop.

Other financial stocks such as Ninety One, Lancashire Holdings, and Close Brothers Group also performed well.

On the downside, real estate stocks faced a downturn, with Urban Logistics REIT, Safestore Holdings, Derwent London, Great Portland Estates, IWG, Empiric Student Property, and Grainger all finishing in the red.

The decline followed the larger-than-expected jump in US inflation, impacting high-yielding and safe-haven assets like real estate.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,961.21 0.33%
FTSE 250 (MCX) 19,801.75 0.19%
techMARK (TASX) 4,441.79 0.22%

FTSE 100 - Risers

Tesco (TSCO) 297.00p 3.30%
HSBC Holdings (HSBA) 663.20p 2.87%
RS Group (RS1) 726.50p 2.18%
3i Group (III) 2,827.00p 1.80%
Next (NXT) 8,898.00p 1.78%
Reckitt Benckiser Group (RKT) 4,305.00p 1.53%
Croda International (CRDA) 4,770.00p 1.49%
Shell (SHEL) 2,869.00p 1.43%
Whitbread (WTB) 3,251.00p 1.15%
Airtel Africa (AAF) 106.20p 1.05%

FTSE 100 - Fallers

Ocado Group (OCDO) 367.70p -3.39%
Anglo American (AAL) 2,145.50p -2.10%
St James's Place (STJ) 431.80p -2.09%
Barratt Developments (BDEV) 455.90p -2.08%
Experian (EXPN) 3,307.00p -1.87%
Phoenix Group Holdings (PHNX) 542.50p -1.81%
Land Securities Group (LAND) 629.00p -1.64%
Unite Group (UTG) 922.50p -1.60%
Hikma Pharmaceuticals (HIK) 1,788.00p -1.60%
Entain (ENT) 811.00p -1.51%

FTSE 250 - Risers

OSB Group (OSB) 390.00p 5.06%
Lancashire Holdings Limited (LRE) 610.00p 4.45%
Close Brothers Group (CBG) 470.80p 3.70%
TBC Bank Group (TBCG) 3,095.00p 3.47%
Tate & Lyle (TATE) 631.00p 3.36%
Moneysupermarket.com Group (MONY) 220.40p 3.09%
Baltic Classifieds Group (BCG) 234.00p 3.08%
Kainos Group (KNOS) 1,006.00p 2.97%
Plus500 Ltd (DI) (PLUS) 1,929.00p 2.93%
Me Group International (MEGP) 171.20p 2.51%

FTSE 250 - Fallers

Safestore Holdings (SAFE) 727.00p -2.94%
Ferrexpo (FXPO) 45.05p -2.91%
Renishaw (RSW) 4,130.00p -2.50%
Inchcape (INCH) 729.50p -2.34%
Mobico Group (MCG) 62.80p -2.03%
Hochschild Mining (HOC) 142.40p -1.92%
Travis Perkins (TPK) 736.00p -1.87%
Hammerson (HMSO) 26.80p -1.83%
Urban Logistics Reit (SHED) 109.60p -1.79%
British Land Company (BLND) 381.80p -1.75%