Stocks in London slumped at the close on Tuesday, alongside the rest of Europe and the US as hotter-than-expected US consumer inflation evaporates hopes of the Federal Reserve reining in its hawkish stance.
‘You could see exactly how unhappy investors were with the latest US inflation numbers - within minutes of the hotter than expected CPI data landing markets took something of a nosedive. 8.3% is a fall on the previous month but the expectation had been for prices to slow more quickly and when you strip out food and energy and look at that core number it was up a touch on July's figures, a fact you can be certain will draw the attention of US central bankers,’ said Danni Hewson of AJ Bell.
‘There's been a lot of talk about how today's data might impact the Fed's upcoming rate decision, but in truth the consensus is still overwhelmingly for a 75-basis point hike next time out. Central bankers have been clear that throwing a cold bucket of water on sizzling prices is their priority and there's a long way between where the US economy currently stands and the much discussed 2% target,’ Hewson added.
The FTSE 100 index closed down 87.17 points, or 1.2% at 7,385.86 on Tuesday. The FTSE 250 ended down 346.66 points, or 1.8%, at 19,167.21. The AIM All-Share closed down 5.78 points, or 0.7%, at 880.85.
The Cboe UK 100 ended down 1.1% at 738.53, the Cboe UK 250 closed down 1.5% at 16,579.08, and the Cboe Small Companies ended down 1.2% at 12,973.25.
US consumer price growth was faster-than-expected last month.
The annual inflation rate for August was 8.3%, topping expectations, according to FXStreet, of 8.1%, but still easing off July's rate of 8.5%.
‘Increases in the shelter, food, and medical care indexes were the largest of many contributors to the broad-based monthly all items increase,’ the Bureau of Labor Statistics said.
Likely to worry the Federal Reserve, however, was August's core inflation rate, which excludes energy and food.
It ticked up to 6.3% on an annual basis from 5.9% in July. The rate had been expected to pick up more modestly to 6.1%.
The Fed will unveil its latest interest rate decision on Wednesday next week. Another 75 basis point rate hike is now 90% priced in by markets, according to the CME's FedWatch tool.
The pound was quoted at $1.1524 at the London equities close Tuesday, down from $1.1698 at the close on Monday.
The euro also slid back in the wake of US inflation numbers. The euro stood at $0.9992 at the European equities close Tuesday, down against $1.0128 at the same time on Monday.
Against the yen, the dollar was trading at JP¥144.23 late Tuesday, higher compared to JP¥142.35 late Monday.
Stocks in New York were solidly in the red at the London equities close, with the Dow Jones Industrial Average down 2.7%, the S&P 500 index down 3.1%, and the Nasdaq Composite down 4.1%.
In the FTSE 100, Ocado fell 14% as the online grocer warned that shoppers are checking out with smaller baskets and seeking value-for-money items due to the cost-of-living crisis in the UK.
For the 13 weeks to August 28, Ocado's revenue edged up 2.7% to £531.5 million compared to a year before.
However, the average basket value was down by 6% in the period to £116 as customers sought to cut back due to inflation.
Further, the company warned that ‘cost headwinds’, particularly energy and dry ice, are likely to weigh on profitability in the fourth quarter in addition to smaller customer baskets.
This comes as UK grocery price inflation hit a record pace, according to survey figures released on Tuesday by data analytics firm Kantar.
Grocery price inflation reached over 12% over the past four weeks ending September 4, with the average household's annual grocery bill now set to soar to £5,181 - if consumers were to buy the same products as they did last year.
In the FTSE 250, Future rose 6.4%. The magazine publisher said it expects profit to be at the top-end of expectations, as it returned to organic audience growth.
Future explained the ‘encouraging’ performance set out in its June trading update has continued, with a return to organic audience growth in the second half of its financial year ending September 30.
Future said this was because Covid comparators were fully lapped, combined with continued digital advertising growth and an improving trend in affiliates.
Elsewhere in London, Trustpilot soared 15% after reporting a double-digit rise in interim revenue and a narrowed loss as it backed its annual revenue outlook.
For the six months that ended on June 30, the Copenhagen-based online review platform reported an 18% rise in revenue to $73.4 million from $62.4 million a year earlier.
Pretax loss narrowed to $9.2 million from $17.3 million, as general and administrative expenses fell 30% to $21.2 million from $30.1 million a year ago.
Joules plummeted 50% as it confirmed that investment talks with clothing retailer Next have ended.
The news confirmed reports over the weekend by Sky News that talks between the two companies had stalled.
Though Joules confirmed investment discussions have ended, it said that discussions regarding Joules potentially adopting Next's Total Platform remain ongoing.
Shares in Next closed down 3.6%.
In European equities on Tuesday, the CAC 40 in Paris ended down 1.4%, while the DAX 40 in Frankfurt ended down 1.6%.
Brent oil was quoted at $93.12 a barrel at the London equities close Tuesday, down from $94.63 late Monday.
Gold was quoted at $1,704.90 an ounce at the London equities close Tuesday, down against $1,731.11 at the close on Monday.
In Wednesday's UK corporate calendar, there are half-year results from homewares retailer Dunelm and oil and gas firm Tullow Oil, as well as full-year results from housebuilder Redrow.
In the economic calendar, the UK publishes CPI and PPI data at 0700 BST.
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