Stocks in London closed lower on Wednesday ahead of the latest decision on the Bank of England monetary policy, which is expected to tighten further.
Investors also reacted to the latest consumer price index data in the US.
The FTSE 100 index closed down 22.76 points, or 0.3% at 7,741.33 on Wednesday. The FTSE 250 ended down 3.75 points at 19,273.29. The AIM All-Share closed down 3.67 points, or 0.4%, at 825.68.
The Cboe UK 100 ended down 0.2% at 774.13, the Cboe UK 250 closed flat at 16,885.16, and the Cboe Small Companies ended down 0.2% at 13,549.41.
Data from the US Bureau of Labor Statistics showed that US consumer prices rose in line with expectations on a monthly basis in April.
The consumer price index was 0.4% higher in April on a month-on-month seasonally adjusted basis, in line with FX Street-cited consensus, and accelerating from a 0.1% rise in March.
Annually, inflation was 4.9% before seasonal adjustment in April, down from 5.0% rate in March. Market consensus, according to FX Street, had expected 5.0% inflation again in April.
Oren Klachkin, lead US economist at Oxford Economics, said: ‘We expect to receive more encouraging news on the inflation front as the economy cools though we won’t reach the Fed’s 2% inflation target for quite some time.’
Stocks in New York were largely lower at the London equities close, with the Dow Jones Industrial Average down 0.2%, the S&P 500 index up 0.2%, and the Nasdaq Composite down 0.6%.
The euro stood at $1.0975 at the European equities close on Wednesday, higher against $1.0955 at the same time on Tuesday. Against the yen, the dollar was trading at JP¥134.48, lower compared to JP¥135.09 late Tuesday.
Following the US inflation report, market focus will now turn to the Bank of England which announces its interest rate decision on Thursday at midday.
The central bank is expected to lift UK interest rates by 25 basis points, but attention will be on whether Threadneedle Street warns of further tightening thereafter, as did the European Central Bank, or guides a pause, as did the US Federal Reserve.
At the last meeting in March, the Bank of England raised UK interest rates by 25 basis points, taking the bank rate to 4.25%.
The pound was quoted at $1.2620, up slightly from $1.2618 at the close on Tuesday.
The Bank of England announces its interest rate decision at 1200 BST on Thursday. A press conference with Governor Andrew Bailey follows at 1230 GMT.
In London, Melrose Industries was the top blue-chip performer, up 4.7%, after it said made a strong start to 2023 and announced a departure from its industrial turnaround strategy, focusing on just aerospace instead for now.
The firm also announced the prospect of consistent share buybacks as a restructuring of its aerospace offering progresses.
Melrose said it traded materially ahead of expectations in the four months to April 30, with ‘significant’ growth in revenue, profit and margin.
Revenue was 19% higher year-on-year at constant currency, helped by a 28% improvement in its Engines divisions. The adjusted operating margin rose ‘substantially’ to 10%. The figures remove its recently demerged divisions from the comparative period.
In April, Melrose Industries completed the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses from the company into Dowlais, which is now a FTSE 250 constituent.
Dowlais closed down 0.7%.
In the FTSE 250, Asos plunged 23% after the online fashion retailer reported significantly weaker interim results.
For the six months to February 28, Asos said revenue declined by 8.2% to £1.84 billion from £2.00 billion a year earlier. Pretax loss widened dramatically to £290.9 million from £15.8 million a year ago.
Asos said the outcome reflected both deliberate actions on capital allocation to improve profitability and a challenging trading backdrop.
Russ Mould, investment director at AJ Bell, however, said that Asos has been ‘the architect of its own mistakes and is now paying the price.’
‘It’s at times like these that consumers look for bargains which means Asos’s decision to cut back on markdowns is somewhat ill-timed. Yes, it is prioritising profits over volumes, but it also needs to be in tune with what the consumer wants,’ he said.
JD Wetherspoon jumped 5.2% as it hailed its ‘highest-ever’ sales in the Easter period.
The pub and hotel chain said like-for-like-sales in the 13-weeks to April 30 rose 12% from a year ago and were 9.1% higher than in the same period in the last full financial year before the pandemic.
Wetherspoon noted that the first weekend of May ‘was exceptionally strong’ over the bank holiday, though the second weekend, including the May 8 Coronation bank holiday, was slightly weaker.
AJ Bell’s Mould said: ‘If you were picking a survivor from the apocalyptic conditions faced by pubs during the pandemic then Wetherspoons might well be it. It has scale, some balance sheet heft and prominent sites as well as a cheap and cheerful offering with mass-market appeal.’
Elsewhere in London, Capita fell 3.9%.
The outsourcing company said that it expects a hit of up to £20 million after a cyber incident last month. This comes from lost professional fees, recovery and remediation costs.
Capita noted that its forensic investigations found that just 0.1% of its server estate was subject to the attack, however, and added it has since taken steps to bolster its cybersecurity.
On AIM, shares in Cellular Goods more than doubled to 1.31 pence following the reveal of a product placement deal with cosmetics retailer Sephora.
Chief Executive Darcy Taylor said: ‘I’m delighted that our products will be going on sale at Sephora.co.uk. The launch bridges the gap between customer awareness and sales by making it easier for customers to purchase our products.’
In European equities on Wednesday, the CAC 40 in Paris ended down 0.6%, while the DAX 40 in Frankfurt ended down 0.5%.
Brent oil was quoted at $76.85 a barrel at the London equities close on Wednesday, up from $74.94 late Tuesday. Gold was quoted at $2,023.42 an ounce, lower against $2,025.96 at the close on Tuesday.
In Thursday’s UK corporate calendar, there are trading statements from ITV, John Wood Group and Rolls-Royce.
In the economic calendar, in addition to the Bank of England’s rate decision, the US producer price index will be published at 1830 BST.
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