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16 Aug, 2023 09:06

London open: Stocks flat as rate-hike fears dampen risk appetite

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UK stocks were struggling for direction on Wednesday after data showed that core inflation remains stubbornly high, raising fears that the Bank of England may step in to tighten monetary policy even further.

Admiral Group

2,619.00p

17:15 23/12/24

0.85%

22.00p

Aviva

462.40p

17:15 23/12/24

1.14%

5.20p

B&M European Value Retail S.A. (DI)

359.10p

17:15 23/12/24

-0.99%

-3.60p

Essentra

130.60p

16:50 23/12/24

0.15%

0.20p

FTSE 100

8,102.72

17:14 23/12/24

n/a

FTSE 250

20,419.09

17:09 23/12/24

n/a

FTSE 350

4,471.06

17:09 23/12/24

n/a

FTSE All-Share

4,428.73

16:44 23/12/24

n/a

General Retailers

4,645.29

17:09 23/12/24

0.00%

0.00

Insurance (non-life)

3,934.56

17:09 23/12/24

1.24%

48.37

Life Insurance

5,428.54

17:09 23/12/24

0.57%

30.57

Support Services

10,515.58

17:09 23/12/24

-0.82%

-87.19

After an hour of trade, the FTSE 100 was more or less flat at 7,396. The index dropped 1.6% on Tuesday to 7,389.64, its third day in the red and the lowest close since 11 July, as record-high wage growth in the UK reignited expectations of a further interest-rate hike by the Bank of England.

In Wednesday's data, the annual rate of UK consumer price inflation slowed again from 7.9% to 6.8% in July, in line with economists' forecasts. However, the slowdown was largely a result of falling food and energy prices. Core inflation, which strips out these volatile items, remained unchanged at 6.9%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the flatlining core rate might "indicate that the headline rate might not budge much more immediately and there are some signs it could even edge back upwards."

"The pound has edged higher against the dollar with the big bets on the Bank of England pushing up interest rates again in September by another 25 basis points to 5.5%, and the high cost of borrowing set to linger."

Producer prices, fell 0.4% month-on-month in July after a 1.3% decline in June (consensus: -0.1%), while the year-on-year rate sunk to -3.3% from -2.7% (consensus: -2.9%).

Overnight, Asian stocks slumped due to fresh concerns over the Chinese economy after retail sales, industrial output and fixed assets investment data all disappointed. The Nikkei 225 and Hang Seng Index both declined 1.5%.

Meanwhile, Wall Street indices also dropped after stronger-than-expected retail sales figures raised concerns that the Federal Reserve may step in once again to fight inflationary pressures. Looking ahead, US housing starts and US industrial production data for July will be released before the opening bell, along with crude oil inventories not long after.

Admiral and Aviva jump

Shares in Admiral rose 7% after the insurer reported that pre-tax profit rose 4% to £234m in the six months to June 30 as it hiked prices in response to claims inflation.

Sector peer Aviva also impressed the market with its interim results, with operating profit rising 8% year-on-year to £715m. Looking ahead, Aviva said it remained confident over its future performance, underpinned by the strong first half.

B&M European Value Retail extended its recent gains, after being linked to takeover rumours surrounding struggling rival retailer Wilko. The latter, which fell into administration last week, gave potential buyers until today to launch a formal offer.

Mining stocks were providing a drag as risk appetite waned, with Antofagasta, Endeavour and Rio Tinto trading lower.

Manufacturer Essentra rose after reporting a 54% surge in first-half results despite a fall in sales, as operating margins jumped.

Market Movers

FTSE 100 (UKX) 7,395.83 0.08%
FTSE 250 (MCX) 18,683.84 0.13%
techMARK (TASX) 4,288.05 -0.17%

FTSE 100 - Risers

Admiral Group (ADM) 2,344.00p 6.59%
Aviva (AV.) 387.80p 2.08%
Centrica (CNA) 144.75p 1.94%
B&M European Value Retail S.A. (DI) (BME) 574.40p 1.63%
3i Group (III) 1,938.00p 1.39%
Melrose Industries (MRO) 525.00p 1.27%
Barclays (BARC) 145.14p 1.11%
Legal & General Group (LGEN) 228.60p 1.11%
Prudential (PRU) 988.00p 0.82%
Glencore (GLEN) 422.45p 0.81%