London close: Stocks mixed after another UK inflation record

London stocks closed in a mixed state on Wednesday, as investors reacted to yet another record for consumer inflation in the UK.

The FTSE 100 ended the session down 0.44% at 7,264.31, while the FTSE 250 was ahead 0.61% to 19,399.84.

Sterling was also going in different directions, last trading down 0.16% against the dollar at $1.1976, while it strengthened 0.11% on the euro to change hands at €1.1743.

“Headlines about Russia contemplating further maintenance to its Nord Stream platform have put European stocks under pressure, as traders weigh up whether they can push this risk rebound much further,” said IG chief market analyst Chris Beauchamp.

“In addition, the double-whammy of UK and Canadian inflation data today has trimmed the appetite of dip buyers, who have been trying to forget about CPI figures in their quest to pick up some bargains.”

Stocks had started the session on the front foot, underpinned by some well-received earnings in the US from the likes of Netflix and Halliburton, and by reports that Russian gas flows via the Nord Stream 1 pipeline were set to resume on time on Thursday following scheduled maintenance.

But the mood turned following reports that Lavrov said the geographical objectives of Moscow's "special military operation" in Ukraine were no longer limited to the eastern Donbas region, and now included a number of other territories.

On home shores, meanwhile, data out earlier from the Office for National Statistics showed that consumer price inflation hit a fresh 40-year high of 9.4% in June as the cost-of-living crisis intensified.

That was up from 9.1% in May and above consensus expectations of 9.3%, with food and fuel prices driving the increase.

The ONS said that food and non-alcoholic drinks rose by 9.8% in the year to June, up from 8.7% in May and the highest since March 2009, while petrol and diesel prices surged 42.3%, the highest rate since before the start of the historical series in January 1989.

Transport costs overall were 15.2% higher.

“The latest UK inflation figures had a bit of everything, whether you’re a sunny optimist who thinks inflationary pressures are close to peaking, or a cautious Cassandra who thinks we’re a long way from escaping the cycle of rising prices,” said Danni Hewson, financial analyst at AJ Bell.

“The headline number reached a new 40-year high of 9.4%, slightly higher than expected, and factory gate prices, often a leading indicator for consumer prices as manufacturers pass on costs, hit their highest level in 45 years.

“However, more encouragingly if you strip out volatile energy and food prices then core inflation actually eased back a touch.”

Official data also showed house prices continuing to push higher despite the mounting cost-of-living crisis.

According to the ONS, average house prices increased by 12.8% over the year to May, up from 11.9% in April.

As a result, the average UK house price was £32,000 higher year-on-year in May, at £283,000.

“The official measure hasn’t registered the slowdown in house price growth reported in recent months by Rightmove and Nationwide, as it is based on completed transactions which were agreed several months ago, before the big jump in mortgage rates,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“The timeliest indicators of demand suggest that the recent momentum in house prices will not be sustained.

“The rise in mortgage rates is so large and so sudden that we think house prices will drop by about 2% in the second half of the year.”

Across the channel, reports emerged that Brussels was drawing up emergency plans to cut gas use, amid fears countries could be left struggling for fuel if Russia halted supplies this winter.

According to Reuters, the European Commission was expected to urge members to reduce demand ahead of winter, including a voluntary target of between 10% and 15% over the next eight months.

It was concerned that Moscow would further restrict supplies in response to European sanctions imposed on Russia following the invasion of Ukraine.

Gazprom, the state-controlled energy giant, has already stopped deliveries to 12 of the bloc’s 27 members.

“We believe that a full disruption is likely, and it is especially likely if we don’t act and leave ourselves vulnerable to it,” an unnamed EU official told Reuters.

“If we wait, it will be more expensive and it will mean us dancing to Russia’s tune.”

Finally, China left its two benchmark lending rates unchanged earlier, in line with forecasts.

In a statement, the People’s Bank of China said the one-year and five-year loan prime rates - which are set by a panel of lenders overseen by the central bank - had been left on hold at 3.7% and 4.45% respectively.

Consensus had been for no change for the two rates, which are used in household and corporate lending.

In London’s equity markets, Royal Mail reversed earlier losses to close up 0.21%, even after it said revenue fell 11.5% year-on-year in the first quarter, reflecting weakening retail trends, lower test kit volumes and a return to a structural decline in letters.

Elsewhere, online grocer and warehouse technology developer Ocado jumped 2.65%, while WPP gained 2.23% following well-received second-quarter results from US media and marketing group Omnicom.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 7,264.31 -0.44%
FTSE 250 (MCX) 19,399.84 0.61%
techMARK (TASX) 4,350.15 0.10%

FTSE 100 - Risers

Scottish Mortgage Inv Trust (SMT) 838.20p 4.78%
Ashtead Group (AHT) 4,074.00p 3.43%
Aveva Group (AVV) 2,312.00p 3.03%
Ocado Group (OCDO) 774.80p 2.65%
Entain (ENT) 1,154.00p 2.44%
WPP (WPP) 853.80p 2.23%
Sage Group (SGE) 691.20p 2.19%
Flutter Entertainment (CDI) (FLTR) 8,028.00p 2.06%
Informa (INF) 579.00p 1.83%
Auto Trader Group (AUTO) 600.40p 1.80%

FTSE 100 - Fallers

Smith (DS) (SMDS) 283.60p -3.83%
AstraZeneca (AZN) 10,918.00p -2.80%
Rolls-Royce Holdings (RR.) 92.03p -1.94%
Reckitt Benckiser Group (RKT) 6,302.00p -1.90%
British American Tobacco (BATS) 3,463.50p -1.84%
Smurfit Kappa Group (CDI) (SKG) 2,819.00p -1.78%
Imperial Brands (IMB) 1,867.50p -1.74%
Prudential (PRU) 1,005.50p -1.66%
Aviva (AV.) 389.50p -1.44%
Lloyds Banking Group (LLOY) 43.45p -1.41%

FTSE 250 - Risers

Future (FUTR) 1,923.00p 7.37%
Volution Group (FAN) 371.00p 6.00%
Molten Ventures (GROW) 452.20p 5.95%
ASOS (ASC) 1,096.00p 5.49%
Carnival (CCL) 781.60p 5.17%
Darktrace (DARK) 369.00p 4.98%
Discoverie Group (DSCV) 672.00p 4.51%
Smithson Investment Trust (SSON) 1,324.00p 4.33%
Diploma (DPLM) 2,560.00p 4.32%
IP Group (IPO) 76.60p 4.15%

FTSE 250 - Fallers

Hochschild Mining (HOC) 74.05p -6.03%
Polymetal International (POLY) 210.20p -4.30%
Currys (CURY) 71.50p -3.51%
Jupiter Fund Management (JUP) 139.40p -3.46%
Just Group (JUST) 66.35p -3.42%
Indivior (INDV) 299.00p -3.17%
Hiscox Limited (DI) (HSX) 860.00p -2.14%
Petershill Partners (PHLL) 215.50p -1.82%
IG Group Holdings (IGG) 711.50p -1.79%
Britvic (BVIC) 828.50p -1.60%