London midday: Stocks fall on rising Brexit fears, UK inflation miss

UK inflation remained depressed in May, with the consumer price index (CPI) flat at 0.3% on an annual basis, short of expectations for a 0.4% increase, data from the Office for National Statistics showed.

The month-on-month rate of CPI only rose to 0.2% when it had been expected to rise to 0.3% from 0.1% in April.

CPI inflation looks set to remain fairly subdued for most of the second half of this year, said Paul Hollingsworth at Capital Economics, with some clear risks on the horizon.

"If the UK votes to leave the EU next week, we expect sterling to fall sharply, which would put significant upward pressure on inflation further ahead. On the other hand, if the UK votes to remain, then sterling could recover a bit.

"But the economy would probably get a post-referendum rebound too. So whatever happens, we expect inflation to regain some momentum over the coming quarters, and should be closer to 1% around the turn of the year."

Polls this week have shown a growing support for Brexit ahead of the 23 June referendum.

A poll from Guardian/ICM, released late Monday, showed the Leave camp enjoyed a 53%-47% advantage, compared with a 52%-48% split reported two weeks ago.

According to the latest YouGov poll, published in The Times on Tuesday, support for Brexit jumped by three percentage points to 46% over the latest week, while backing for ‘Remain’ lost another three percentage points to 39%.

The pound fell 0.62% to $1.4181 at 1126 BST.

Oil prices were also lower as investors remained risk-averse ahead of the EU referendum. Brent crude dropped 1.2% to $49.72 per barrel and West Texas Intermediate decreased 1.3% to $48.22 per barrel at 1137 BST.

Meanwhile, the first combined report from the Land Registry and the Office for National Statics showed UK house prices rose an annualised 8.2% in April to an average of £209,000. On the month, prices edged up 0.6%. Prices had risen 8.5% year-on-year and 1.1% month-on-month in March as buy-to-let investors and second home buyers rushed to make purchases ahead of higher stamp duty on these properties on 1 April.

In the eurozone, industrial production in April was up 1.1% from March versus expectations of 0.8% growth, Eurostat said. Compared with April 2015, production grew by 2%, exceeding forecasts for a 1.3% increase.

Employment in the eurozone in the first quarter of the year increased 0.3% compared to the final three months of 2015, rising to the highest levels since the third quarter of 2008.

Seasonally adjusted data from Eurostat showed the rate of quarter-on-quarter increase for the eurozone remained the same as the previous period's 0.3% growth. However, eurozone employment rose 1.4% year-on-year, up from 1.2% the prior quarter.

Still to come, US retail sales at 1330 BST and US business inventories at 1500 BST.

Among corporate stocks, housebuilders were the biggest fallers on the FTSE 350 amid Brexit worries. Berkley Group, Taylor Wimpey, Crest Nicholson and Barratt Developments were in the red.

Ted Baker shares gained after reporting a 12.7% increase in first quarter retail sales and saying it expects full year results to meet expectations.

Ashtead rallied after announcing a bumper dividend and a £200m share buyback following a strong fourth quarter where profit margins grew to record levels.

Go-Ahead plunged after saying in a trading update it expects margins over the life of the Govia Thames Railway franchise to be lower than previously anticipated during periods of operational challenges and industrial disputes. Investec downgraded its stance on the transport operator to ‘add’ from ‘buy’ and cut the price target to 2,500p from 2,800p following the trading update.

FirstGroup jumped after reporting a rise in full-year profit despite a drop in revenue following the loss of rail franchises.

Market Movers

FTSE 100 (UKX) 5,973.35 -1.18%
FTSE 250 (MCX) 16,257.41 -1.91%
techMARK (TASX) 2,973.39 -1.14%

FTSE 100 - Risers

Ashtead Group (AHT) 974.00p 1.78%
Pearson (PSON) 799.50p 0.63%
Fresnillo (FRES) 1,240.00p 0.57%
Centrica (CNA) 202.90p 0.50%
Associated British Foods (ABF) 2,863.00p 0.25%
Vodafone Group (VOD) 211.35p 0.12%
Inmarsat (ISAT) 710.00p -0.07%
Mondi (MNDI) 1,302.00p -0.08%
3i Group (III) 540.50p -0.09%
Burberry Group (BRBY) 1,050.00p -0.10%

FTSE 100 - Fallers

Berkeley Group Holdings (The) (BKG) 3,006.00p -3.65%
Sky (SKY) 862.00p -3.31%
Anglo American (AAL) 615.00p -3.21%
Barratt Developments (BDEV) 520.00p -3.08%
Worldpay Group (WI) (WPG) 266.70p -2.95%
Taylor Wimpey (TW.) 174.60p -2.84%
St James's Place (STJ) 817.50p -2.74%
Barclays (BARC) 160.70p -2.69%
Provident Financial (PFG) 2,597.00p -2.62%
Hargreaves Lansdown (HL.) 1,200.00p -2.52%

FTSE 250 - Risers

FirstGroup (FGP) 107.40p 4.17%
Indivior (INDV) 216.80p 3.24%
Ted Baker (TED) 2,399.00p 3.18%
Riverstone Energy Limited (RSE) 858.50p 1.36%
Allied Minds (ALM) 330.00p 1.16%
Euromoney Institutional Investor (ERM) 950.00p 1.06%
PayPoint (PAY) 950.50p 1.01%
P2P Global Investments (P2P) 852.00p 0.77%
Debenhams (DEB) 69.85p 0.65%
BGEO Group (BGEO) 2,449.00p 0.62%

FTSE 250 - Fallers

Go-Ahead Group (GOG) 2,035.00p -16.36%
Ocado Group (OCDO) 207.90p -7.31%
Pendragon (PDG) 34.15p -7.20%
Telecom Plus (TEP) 951.00p -6.76%
Crest Nicholson Holdings (CRST) 525.00p -6.25%
Aldermore Group (ALD) 184.10p -5.59%
Electrocomponents (ECM) 262.30p -5.41%
Shawbrook Group (SHAW) 227.00p -5.38%
Softcat (SCT) 347.60p -5.29%
Serco Group (SRP) 106.00p -5.19%