Stock prices in London declined on Wednesday morning as consumer price inflation came in higher than expected for December, adding concerns for some economists who had expected a rate cut in May.
The FTSE 100 index opened down 103.82 points, 1.4%, at 7,454.52. The FTSE 250 was down 262.19 points, 1.4%, at 18,931.13, and the AIM All-Share was down 7.42 points, 1.0%, at 740.39.
The Cboe UK 100 was down 1.4% at 744.35, the Cboe UK 250 was down 1.6% at 16,376.08, and the Cboe Small Companies was down 0.5% at 14,912.17.
UK consumer prices unexpectedly heated up in December, according to data from the Office for National Statistics on Wednesday.
The ONS said the consumer price index rose by 4.0% annually in December, the pace of inflation notching up from a 3.9% increase in November. The reading came in hotter than market expectations, with consensus having been for price inflation to cool to 3.8%, according to FXstreet.
Core consumer prices, which exclude energy, food, alcohol and tobacco, rose 5.1% in December annually, having risen by the same amount a month earlier. The reading came in hotter-than-expected, with market consensus expecting core prices to cool to 4.9%.
‘After an unexpected pick-up in UK inflation, the market may be getting ahead of itself by pricing a May rate cut,’ said James Smith at ING.
Meanwhile, Ebury’s Matthew Ryan commented: ‘This morning’s UK CPI data reinforces our suspicions that the ’final mile’ in the Bank of England’s inflation fight will be the toughest, and that the path towards the 2% target will be anything but plain sailing.’
The BoE will make its next interest rate decision on February 1. Before that, there is the European Central Bank decision on January 25, as well as the US Federal Reserve on January 31.
At 1000 GMT, there will be a CPI reading for the eurozone for investors to digest.
In European equities on Wednesday, the CAC 40 in Paris was down 1.1%, while the DAX 40 in Frankfurt was down 0.9%.
Overnight, there was some disappointing data from China to digest, which sent markets plummeting. In China, the Shanghai Composite closed down 2.1%, while the Hang Seng index in Hong Kong was down 3.7% in late dealings.
China’s economy last year grew at one of its slowest rates in more than three decades, official figures showed Wednesday, as it was battered by a crippling property crisis, sluggish consumption and global turmoil.
The figures were in line with expectations and even beat Beijing’s target but will likely pile fresh pressure on officials to unveil more stimulus measures to kickstart business activity and get the country’s army of consumers spending again.
China’s National Bureau of Statistics revealed that gross domestic product expanded 5.2% to hit ¥126 trillion, or $17.6 trillion, last year.
The annual reading is better than the three percent recorded in 2022, when strict zero-Covid curbs destroyed activity, but marks the weakest performance since 1990, excluding the pandemic years.
While 5.2% would be looked on enviously by other governments such as the US and eurozone – which each expanded around two percent in 2022 – it is well down from the levels around 6% or 7% constantly enjoyed in the 2010s.
The news sent China-exposed stocks, listed in London lower. Insurer Prudential lost 2.9% and Asia-focused bank Stand Chartered fell 2.6%. Luxury fashion company Burberry lost 0.9%
In Asia on Wednesday, the Nikkei 225 index in Tokyo was down 0.4%. The S&P/ASX 200 in Sydney closed down 0.3%.
The pound was quoted at $1.2660 early on Wednesday in London, lower compared to $1.2676 at the equities close on Tuesday. The euro stood at $1.0875, lower against $1.0894. Against the yen, the dollar was trading at JP¥147.78, higher compared to JP¥146.81.
In the FTSE 100, BP lost 0.8%.
BP named Murray Auchincloss as its permanent chief executive officer. He has been interim CEO of the oil major since September last year, following the shock departure of Bernard Looney.
Looney had resigned after less than four years in the role, after admitting that he had not been ‘fully transparent’ about historical relationships with colleagues.
Further, BP said it will buy Getec Energie, an independent supplier of energy to commercial and industrial customers in Germany, for an undisclosed sum.
Shell, meanwhile, lost 2.2%. UBS cut the oil majors stock to ’neutral’ from ’buy’.
The bank also cut M&G and Admiral Group’s stock to ’neutral’. Shares fell 2.6% and 3.1%, respectively.
In the FTSE 250 index, Keller Group rose 3.3% towards the top of the index.
Keller Group said 2023 underlying operating profit is expected to be significantly ahead of market expectations. Analyst consensus for underlying operating profit in 2023 is £150 million, which would be 38% higher than £108.6 million in 2022.
CEO Michael Speakman said: ‘We are very encouraged by the group’s strong progress in 2023. The combination of management actions to improve operational performance in project execution, commercial agility in the face of a dynamic market, and the one-off benefits in North America will result in Keller delivering a record performance in 2023 that has significantly exceeded our original expectations.’
Amongst London’s small caps, 888 lost 7.0%.
The gambling firm said that revenue in the final quarter of 2024 fell 7.2% to £424 million from £457 million a year earlier. Full-year revenue dropped 7.5% to £1.71 billion from £1.85 billion.
‘In FY23 the group made important strategic and operational progress in the face of some significant regulatory and compliance headwinds,’ CEO Per Widerstrom noted.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.2%.
Brent oil was quoted at $77.18 a barrel early in London on Wednesday, down from $78.10 late Tuesday. Gold was quoted at $2,023.98 an ounce, down against $2,038.07.
Still to come on Wednesday’s economic calendar, there are US retail sales at 1330 GMT.
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