Stock in London closed lower on Wednesday for the second time in a row, as UK consumer inflation showed signs on easing, but not enough to deter further rate hikes from the Bank of England, alongside the US Federal Reserve.
The FTSE 100 index closed down 108.56 points, or 1.5% at 7,277.30 on Wednesday. The FTSE 250 ended down 318.01 points, or 1.7%, at 18,849.20. The AIM All-Share closed down 12.31 points, or 1.4%, at 868.34.
The Cboe UK 100 ended down 1.6% at 727.11, the Cboe UK 250 closed down 1.8% at 16,274.24, and the Cboe Small Companies ended down 1.6% at 12,768.77.
‘While US markets seem to have downed a hangover cure, London markets have been prescribed with a hair of the dog that did nothing to settle its stomach. At one point the FTSE 100 could only boast four companies in positive territory, unnerved once again by core inflation numbers that are still heading in the wrong direction,’ said Danni Hewson of AJ Bell.
The UK consumer price index rose 9.9% year-on-year in August, unexpectedly slowing from 10.1% in July. Consensus, according to FXStreet, was for the rate reading to tick up to 10.2%.
July's figure had been the highest since current records began in 1997 and at a level, according to models, not seen since 1982. Inflation remains far higher than the Bank of England's 2% target.
A fall in the price of motor fuels made the largest downward contribution, while rising food prices were the largest upward contributor.
The print comes a day after US consumer price growth topped expectations in August.
The annual inflation rate for August was 8.3%, beating forecast, according to FXStreet, of 8.1%, but still easing off July's rate of 8.5%.
The Fed will unveil its latest interest rate decision on Wednesday next week, with a 75 basis point rate hike now 90% priced in by markets, according to the CME's FedWatch tool.
The Bank of England reveal its own interest rate decision next Thursday. A 75 basis point hike is now heavily backed, but many analysts believe a 50 basis point hike is also possible.
‘There has been some good news on prices out of the US today, with producer prices clocking up their second monthly decline in a row. Supply chains are finally finding another gear and the falling cost of oil will help with shipping costs. But rate hikes on both sides of the Atlantic are inevitable even if the UK's update has been delayed by a week to allow the country to mourn the passing of Queen Elizabeth II,’ Hewson added.
The pound was slightly stronger on the back of the unexpected easing inflation. Sterling was quoted at $1.1588 at the London equities close Wednesday, up from $1.1524 at the close on Tuesday.
Stocks in New York were in the green at the London equities close, with the Dow Jones Industrial Average up 0.4%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.8%.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt ended down 1.2%.
The euro stood at €0.9997 at the European equities close Wednesday, up slightly against $0.9992 at the same time on Tuesday.
Against the yen, the dollar was trading at JP¥142.70 late Wednesday, down compared to JP¥144.23 late Tuesday.
In the FTSE 100, Ocado extended losses after a 15% fall on Tuesday resulting from a dim sales outlook for its joint venture, Ocado Retail.
A downgrade from Credit Suisse on Wednesday morning kept Ocado in the red. The stock was cut to 'underperform' from 'neutral', pushing the stock to finish 8.2% lower.
In the mid-caps, Aston Martin was down 2.3%. The luxury car maker is facing a £150 million lawsuit from two former car dealers, the Financial Times reported.
The dealers claim they are owed around £150 million for underwriting Aston Martin's development of the Valkyrie hypercar.
The claim follows Aston Martin's announcement back in June of 2021 that it had filed civil legal proceedings against Nebula Project, alleging that Nebula had failed to pay to Aston Martin some customer deposits received for the Valkyrie.
Dunelm was up 3.5% as it surpassed pre-pandemic annual sales for a second consecutive year.
Total sales in the financial year to July 2 were up 18% at £1.58 billion from £1.34 billion the year before. This compares to £1.10 billion for financial year 2019.
‘We feel confident and well prepared to weather the current economic pressures - we emerged from an unprecedented global pandemic as a bigger, better business and we believe we have the tools in place to do that again,’ said Chief Executive Officer Nick Wilkinson.
Elsewhere in London, Fundsmith shares were up 10% as the investor announced it intends to be placed in voluntary liquidation, with proceeds from winding up to be returned to its shareholders.
Fundsmith invests in consumer-oriented companies in developing countries. It said that it believes the liquidation proposal is in the ‘best interests’ of its shareholders.
Naked Wines sank 38%. The firm said it is mulling plans to improve profit and keep a lid on costs as it grapples with slower sales progress due to pandemic tailwinds unwinding.
Inspirit Energy surged 36%. The heat and power appliances manufacture jumped as it announced that further testing of a heat recovery system in Poland using its new technology resulted in near doubling in the power output.
Brent oil was quoted at $95.38 a barrel at the London equities close Wednesday, up from $93.12 late Tuesday.
Gold was quoted at $1,705.20 an ounce at the London equities close Wednesday, up against $1,704.90 at the close on Tuesday.
In Thursday's UK corporate calendar, there is a trading statement from rail and coach ticketing firm Trainline as well as first quarter results from online trading platform IG Group.
In the economic calendar, there is US unemployment and retail sales data at 1330 BST. Before then, France will release its CPI print at 0745 BST.
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