London open: Stocks fall but Rolls-Royce bucks trend

At 0830 GMT, the FTSE 100 was down 0.5% at 7,422.76.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Subdued sentiment is hanging around with investors keeping their powder dry ahead of a key inflation report in the US, while the impact of elevated interest rates on economies is still being assessed.

"Oil prices have edged up a little, as the delayed OPEC meeting looms, where an extension of production cuts is expected to be announced by Saudi Arabia and Russia, while other producers could also indicate a willingness to rein in output to help push price higher."

Figures out earlier showed that shop price inflation dropped to its lowest in 17 months in November, as retailers stepped up discounting ahead of the key festive shopping season.

The year-on-year growth in retail prices eased to 4.3% this month, down from 5.2% in October, according to the closely watched Shop Price Index put together by the British Retail Consortium (BRC) and Nielsen.

This was below the three-month average of 5.3% and the lowest rate of annual growth since June 2022.

Food inflation slowed to 7.8% from 8.8%, particularly for dairy products, due to lower domestic energy prices reducing overall input costs. Non-food inflation fell to 2.5% from 3.4%.

Over the month of November, prices were flat, slowing from the 0.3% month-on-month growth in October.

"Shop price inflation eased for the sixth month in a row as retailers competed fiercely to bring prices down for customers ahead of Christmas," said Helen Dickinson, chief executive of the BRC.

"Retailers are committed to delivering an affordable Christmas for their customers. They face new headwinds in 2024 - from government-imposed increases in business rates bills, to the hidden costs of complying with new regulations. Combining these with the biggest rise to the National Living Wage on record will likely stall or even reverse progress made thus far on bringing down inflation, particularly in food."

In equity markets, Rolls-Royce surged as it set out its medium-term targets ahead of a capital markets day. The engine maker said it plans to deliver operating profit of £2.5bn to £2.8bn, operating margin of 13% to 15%, free cashflow of between £2.8bn and £3.1bn and a return on capital of 16% to 18%.

Budget airline easyJet flew higher as it said it swung to a profit in its annual results after a record second-half financial performance. It also delivered a positive outlook for the year ahead and reinstated its dividend.

EasyJet reported a headline pre-tax profit of £445m in the 12 months to 30 September, versus a loss of £178m the year before and in line with management's guidance of £440-460m.

IT infrastructure technology and services provider Softcat was in the black as it reported a robust first-quarter performance, achieving double-digit gross profit growth driven by strong demand.

Pets at Home edged up after it backed its full-year guidance as it posted a jump in interim revenues, although profits fell as it continued to invest in its new digital platform and moved to a new distribution centre.

Mike Ashley’s Frasers Group was a high riser after an initiation at ‘overweight’ at Barclays. The bank said Frasers is overlooked by many investors, given a low free float and eclectic operations.

"We think this ignores i) being named by Nike and Adidas as a key partner, and ii) potential MT upside from Financial Services. The group's approach can be unconventional, but the focus is long term, and its track record is strong," it said.

M&G nudged higher after an initiation at ‘buy’ at Goldman Sachs, which said the shares are attractively valued.

On the downside, Man Group fell after Morgan Stanley cut its stance on the shares to 'equalweight'.