London midday: FTSE creeps up as inflation undershoots; EU summit in focus

London stocks were still a touch higher by midday on Wednesday as sterling fell after the release of much weaker than expected UK inflation data for September, with moves muted overall as investors eyed the EU summit in Brussels.

The FTSE 100 was up 0.1% to 7,065.48 - off its six-month lows but still some way from the 7,500 plus levels seen at the start of the month - while the pound was down 0.3% against the dollar at 1.3139 and 0.2% lower the euro at 1.1369.

Data released earlier by the Office for National Statistics showed that inflation unexpectedly eased last month, providing relief for under-pressure consumers and significantly reducing the prospect of an imminent rate hike by the Bank of England.

The consumer price index rate of inflation was 2.4% last month, down from 2.7% in August. Most analysts had pencilled in a rate of around 2.6%. The CPIH rate of inflation, which includes owner-occupier housing costs, was also lower, at 2.2% against 2.4% in August.

Coming a day after average earnings were shown to have risen 2.7% in August, this indicated real wages were rising, boosting economic growth prospects, said IG market analyst Joshua Mahony. "The decline in the pound in the wake of today’s inflation data highlights the feeling that the past two days have provided a significant buffer for the BoE, reducing the pressure to look into any further monetary tightening, for now."

With just over five months left until the Brexit deadline, the focus will shift to the EU summit in Brussels later on Wednesday, after Donald Tusk said there were "no grounds for optimism" regarding a breakthrough in talks.

"With a deadlock on the Northern Irish border issue seen as a major obstacle in Brexit talks, there is little hope for a breakthrough at the EU summit," said Lukman Otunuga, research analyst at FXTM. "If the summit concludes with no real progress made on negations, this simply raises the risk of a no-deal Brexit outcome. Given the pound is extremely sensitive to Brexit headlines, such a scenario could send the currency collapsing like a house of cards."

In corporate news, Pearson rallied as the education publisher said earnings per share would be boosted by a one-off tax benefit, helping distract investors from the softness of its the North American higher eduction market.

Segro rose as the real estate investment trust said new leasing deals were up 43% in the nine months to September.

On the downside, housebuilders fell after Crest Nicholson warned that full-year profits will be lower than expected, while margins will be below previous guidance as it announced the departure of its chief financial officer. Berkeley Group, Persimmon and Taylor Wimpey retreated, while Barratt Developments slipped despite what appeared to be a solid trading statement.

Russ Mould, investment director at AJ Bell, said that if you scratch the surface of Barratt's announcement, there are a couple of worrying signs. He pointed out that in the first 15 weeks of its current financial year, reservations per active outlet per average week, a key metric for the industry, slipped to 0.72 from 0.74 a year ago and the number of new developments is down from 62 to 53.

Wealth manager Rathbone Brothers nudged down after the release of its third-quarter results and IT infrastructure provider Softcat was under the cosh as a strong update fell short of lofty market expectations.

Mediclinic was under pressure after a trading update, with revenues from the Middle East lower than expected and lower admissions in South Africa due to fewer cases of pneumonia and bronchitis. Spire Healthcare also lost ground.

BHP Billiton was a touch weaker as it said strong Chinese demand helped to boost first-quarter iron ore production but cut 2019 copper production forecasts, while Hochschild Mining slipped even as it lifted its annual gold production target.

On the broker note front, Hargreaves Lansdown rallied on an upgrade to 'market perform' from 'underperform' at Bernstein and Sophos was boosted by an initiation at 'buy' from Liberum.

Inchcape tumbled after HSBC slashed the price target on the hold-rated stock to 650p from 860p.

Crest Nicholson was downgraded to 'hold' at Liberum and Fevertree was initiated at 'hold' by Deutsche Bank. Go-Ahead was lifted to 'buy' by HSBC and Stagecoach was cut to 'hold'.

Market Movers

FTSE 100 (UKX) 7,065.48 0.09%
FTSE 250 (MCX) 19,057.71 -0.48%
techMARK (TASX) 3,338.61 -0.11%

FTSE 100 - Risers

Pearson (PSON) 844.80p 3.35%
Evraz (EVR) 561.80p 2.52%
Scottish Mortgage Inv Trust (SMT) 496.90p 2.51%
Micro Focus International (MCRO) 1,427.50p 2.00%
Glencore (GLEN) 320.40p 1.78%
Rio Tinto (RIO) 3,803.00p 1.74%
Ocado Group (OCDO) 847.82p 1.73%
AstraZeneca (AZN) 5,862.00p 1.72%
Randgold Resources Ltd. (RRS) 6,090.00p 1.67%
London Stock Exchange Group (LSE) 4,263.00p 1.57%

FTSE 100 - Fallers

Compass Group (CPG) 1,526.00p -2.93%
WPP (WPP) 1,034.00p -2.73%
Berkeley Group Holdings (The) (BKG) 3,309.00p -2.68%
Fresnillo (FRES) 885.73p -2.50%
Reckitt Benckiser Group (RB.) 6,455.00p -2.37%
Whitbread (WTB) 4,531.00p -2.07%
Aviva (AV.) 427.70p -1.86%
easyJet (EZJ) 1,188.50p -1.82%
Persimmon (PSN) 2,223.00p -1.59%
Coca-Cola HBC AG (CDI) (CCH) 2,361.00p -1.46%

FTSE 250 - Risers

Sophos Group (SOPH) 491.20p 3.76%
Contour Global (GLO) 180.33p 3.05%
IntegraFin Holding (IHP) 329.00p 2.81%
Lancashire Holdings Limited (LRE) 579.50p 2.57%
Card Factory (CARD) 186.10p 2.25%
Ferrexpo (FXPO) 229.50p 2.14%
Jupiter European Opportunities Trust (JEO) 800.38p 1.96%
AA (AA.) 106.82p 1.93%
Kier Group (KIE) 935.50p 1.91%
Fidelity China Special Situations (FCSS) 193.58p 1.88%

FTSE 250 - Fallers

Mediclinic International (MDC) 386.00p -18.69%
Inchcape (INCH) 545.50p -11.52%
Softcat (SCT) 716.00p -9.48%
Spire Healthcare Group (SPI) 121.20p -5.61%
TI Fluid Systems (TIFS) 187.80p -5.44%
Stagecoach Group (SGC) 148.60p -4.87%
WH Smith (SMWH) 1,796.00p -4.62%
Crest Nicholson Holdings (CRST) 308.60p -4.46%
Thomas Cook Group (TCG) 44.34p -4.11%
Just Group (JUST) 80.15p -3.95%