Stocks in London fell back on Thursday with losses accelerating after strong US inflation figures dented hopes of an early cut in interest rates.
The FTSE 100 index closed down 75.17 points, 1.0%, at 7,576.59. The FTSE 250 ended down 172.15 points, 0.9%, at 19,107.93, and the AIM All-Share closed down 4.99 points, or 0.7%, at 744.72.
The Cboe UK 100 ended down 1.0% at 757.53, the Cboe UK 250 closed down 1.1% at 16,559.11, and the Cboe Small Companies ended down 0.4% at 15,099.38.
In European equities on Thursday, the CAC 40 in Paris ended down 0.6%, while the DAX 40 in Frankfurt ended down 0.9%.
According to the Bureau of Labor Statistics, the nation’s yearly inflation rate picked up to 3.4% in December, from 3.1% in November. The reading was hotter than expected. According to FXStreet cited consensus, the annual inflation rate was forecast to only slightly heat up to 3.2%.
Annual core inflation also came in above forecast at 3.9%, against expectations of 3.8%, according to FXStreet. The measure, which excludes food and energy, eased from 4.0% in November.
The US inflation rate peaked at 9.1% in June 2022, but steadily ebbed to as low as 3.0%. More recent readings have suggested that the path back towards the Fed’s 2% target will be a bumpy one. The annual inflation rate had picked up to 3.7% in August of last year.
The data comes ahead of the first Fed decision of the year on January 31. The reading may help direct the path of US interest rates. The US central bank is expected to stand pat in its first meeting of the year, leaving rates at the 5.25%-5.50% range, before cutting rates in March.
AJ Bell’s Russ Mould said hotter-than-expected inflation would go down badly, ‘as it would give the Federal Reserve more reason to keep interest rates high.’
He added: ‘It would certainly pour cold water on the idea that rates could be cut as soon as March.’
The dollar was mostly higher on Thursday afternoon, suggesting that US inflation data has called into question where interest rates will be going in the next year.
The pound was quoted at $1.2703 at the London equities close Thursday, down compared to $1.2725 at the close on Wednesday. The euro stood at $1.0945 at the European equities close Thursday, lower against $1.0958 at the same time on Wednesday.
Against the yen, the dollar was trading at JP¥146.07, higher compared to JP¥145.74 late Wednesday.
On the FTSE 100, Whitbread rose 2.3%, putting it at the top of the index on Thursday.
For the 13 weeks to November 30, the Dunstable, Bedfordshire-based owner of the Premier Inn chain of hotels said Premier Inn UK sales grew 11% year-on-year, citing ‘strong demand’ in London and the regions.
Chief Executive Dominic Paul said: ‘We continue to execute against our strategic priorities at pace and given the structural shift in UK hotel supply, positive current trading, a clear commercial plan and our ongoing focus on driving cost efficiencies, we remain confident in the outlook.’
Marks & Spencer dropped 5.0%, with investors unnerved by warnings of higher costs ahead.
It reported sustained ‘strong sales momentum’ over the festive trading period in its financial third quarter, the 13 weeks to December 30.
Looking ahead, M&S said it was confident of annual results in line with market expectations. However, it pointed to uncertainty in terms of economic growth, and consumer and geopolitical risks. It also faces increased costs from higher-than-expected wage and business rate cost inflation.
In the FTSE 250, Trustpilot shot up 14%.
The Copenhagen-based consumer reviews platform said in 2023, expected revenue jumped 18% to $176 million from $149 million in 2022.
CEO Adrian Blair said: ‘Building on a solid performance in the first half of the year, we achieved further growth and margin improvement in the second half, with profitability and positive free cash flow ahead of expectations for the year.’
Further, Trustpilot started a share buyback programme of up to £20 million, the sole purpose of which is to reduce share capital.
Darktrace rose 8.9%.
The Cambridge, England-headquartered cybersecurity company reported double-digit revenue growth over its first half, and raised its targets for its full financial year.
Ferrexpo lost 9.6%.
The Swiss iron ore pellet producer with assets in Ukraine said total iron ore pellet production from iron ore in the fourth quarter fell 54% to 577,140 tonnes from 1.3 million tonnes in the third quarter. Production for 2023 was 3.8 million tonnes, down 37% from 5.7 million tonnes the previous year.
Total commercial production, comprising pellets and commercial concentrate, dropped 50% to 677,000 tonnes in the fourth quarter from 1.3 million tonnes in the third.
Amongst London’s small-caps, Mears Group rose 8.3%, after it said it expects its 2023 results to beat market expectations.
The Gloucester, England-based housing and social care provider forecasts revenue of £1.05 billion, up 7.3% from 2022’s £959.6 million and ahead of the market forecast of £1.03 billion.
Adjusted pretax profit is expected at £43 million, compared to consensus of £40.9 million. This would be a 22% increase from a adjusted pretax profit of £35.2 million in 2022.
Stocks in New York were lower at the London equities close, with the DJIA down 0.6%, the S&P 500 index down 0.8%, and the Nasdaq Composite down 0.9%.
Brent oil was quoted at $78.92 a barrel at the London equities close Thursday, up from $77.36 late Wednesday.
Gold was quoted at $1,017.55 an ounce at the London equities close Thursday, down against $2,026.60 at the close on Wednesday.
In Friday’s UK corporate calendar, Ashington Innovation and Dukemount Capital will hold annual general meetings.
The economic calendar for Friday has inflation readings from China.
At 0700 GMT there is a slew of UK data, including a gross domestic product reading, industrial production data, and trade balance.
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