London midday: Stocks up, pound down as inflation data casts doubt over BoE hike

London stocks extended gains by midday on Wednesday as the pound took a hit from the latest round of inflation data, which raised doubts over a rate hike by the Bank of England next month.

The FTSE 100 was up 0.7% to 7,278.46, while the pound was down 0.6% against the dollar to 1.4208 and 0.5% weaker versus the euro at 1.1486 after figures from the Office for National Statistics showed inflation fell faster than expected last month, to its lowest level in a year.

The consumer price index in March was up 2.5% compared to the same month last year, down from the 2.7% level the month before where it was expected to stay, and the third fall since hitting a peak of 3.1% last November. Month on month, CPI was up just 0.1%, versus the 0.3% forecast and down from a 0.4% rise in February.

Core CPI, which excludes more volatile prices such as for fuel and food, eased down to 2.3% from 2.4%, with the market having expected a slight pick-up to 2.5%. RPI was down to 3.3% from 3.6%.

The slowdown in inflation was largely caused by clothing, tobacco and alcohol prices, which increased more slowly in March than they did a year ago.

With consumers squeezed by anaemic wage growth and high inflation throughout last year, the easing of inflation comes as further good news for cash-strapped households after ONS numbers the previous day showing pay growth accelerated to 2.8% in February.

Oanda analyst Craig Erlam said: "Just as it looked as though everything was falling into line for a rate hike - 43-year low in unemployment, record high employment, wages rising and inflation well above target - the data today has cast a shadow of doubt over it. If inflation is naturally trending back towards target, wage growth is only moderate and Brexit is causing uncertainty for the economic outlook of the UK, can the central bank afford to wait until later in the year before hiking?

"While I think that would make sense, I wonder whether policy makers will feel somewhat compelled to raise in May having spent so long hinting at doing so and will compensate for this by stressing that another this year is unlikely. The inflation numbers today were well below expectations and represented another decline after peaking in November but that are still above target which may afford the MPC the ability to hike while still expressing concern about price pressures and the lack of slack in the labour market."

In corporate news, Hammerson rallied after saying it has withdrawn its recommendation for its proposed takeover of Intu Properties, blaming problems in the UK retail market and opposition among some shareholders for its change of heart. Intu shares slumped.

Melrose Industries was in the black as it urged all remaining GKN shareholders to accept its takeover offer before midday on Wednesday as it will become unconditional in all respects at 0800 BST on Thursday.

Mediclinic International advanced after saying it expects profits for the year to be marginally ahead of expectations, thanks to a "significant" second half improvement in its Middle East hospitals.

Rio Tinto, Polymetal and Hochschild were all on the front foot following production reports, while Segro gained after hailing a "strong" start to 2018.

Distribution and outsourcing group Bunzl was higher as it posted a 7% jump in first-quarter revenue and announced the completion of two acquisitions.

Bodycote gained as it signed a 15-year contract with Rolls-Royce's civil aerospace business that is expected to be worth more than £160m in incremental revenues, while Meggitt nudged higher after saying it has secured a multi-million dollar contract with Korea Aerospace Industries.

Countryside Properties was up as the housebuilder posted a 15% increase in first-half total completions, while Moneysupermarket rose as the price comparison website reported a 4% jump in first-quarter revenue and said it remains confident of meeting current market expectations.

On the downside, Micro Focus dropped as US peer IBM saw its shares slump after the company's first-quarter margins missed forecasts, while CYBG was under pressure as it said it will set aside another £350m for legacy claims over mis-sold payment protection insurance.

Tritax Big Box fell as it announced a placing to fund its acquisition pipeline and Jupiter Fund Management retreated after it reported a drop in first-quarter assets under management.

In broker note action, Rio Tinto was upgraded to 'buy' at HSBC, which also cut KAZ Minerals to 'reduce' and downgraded Whitbread to 'hold'. The AA was lifted to 'neutral' at Credit Suisse.

Market Movers

FTSE 100 (UKX) 7,278.46 0.73%
FTSE 250 (MCX) 19,899.97 0.36%
techMARK (TASX) 3,379.30 0.58%

FTSE 100 - Risers

Mediclinic International (MDC) 659.40p 5.54%
Glencore (GLEN) 359.32p 3.40%
Rio Tinto (RIO) 3,902.50p 3.38%
Anglo American (AAL) 1,750.40p 3.07%
Evraz (EVR) 400.80p 2.95%
BHP Billiton (BLT) 1,486.80p 2.71%
Antofagasta (ANTO) 968.40p 2.37%
Shire Plc (SHP) 3,700.00p 2.17%
Fresnillo (FRES) 1,281.00p 2.15%
Sage Group (SGE) 621.60p 1.97%

FTSE 100 - Fallers

Micro Focus International (MCRO) 1,261.00p -2.25%
Coca-Cola HBC AG (CDI) (CCH) 2,470.00p -1.79%
Hargreaves Lansdown (HL.) 1,718.00p -1.66%
Barratt Developments (BDEV) 550.60p -1.64%
Taylor Wimpey (TW.) 189.60p -1.56%
Persimmon (PSN) 2,663.32p -1.50%
Bunzl (BNZL) 2,103.00p -1.45%
Whitbread (WTB) 4,141.00p -1.40%
easyJet (EZJ) 1,604.00p -1.11%
Marks & Spencer Group (MKS) 277.99p -1.07%

FTSE 250 - Risers

Polymetal International (POLY) 691.60p 10.90%
Hochschild Mining (HOC) 218.30p 9.15%
Hunting (HTG) 778.00p 5.63%
Ferrexpo (FXPO) 229.70p 5.37%
Moneysupermarket.com Group (MONY) 296.00p 4.41%
Tullow Oil (TLW) 221.30p 3.95%
Kaz Minerals (KAZ) 916.16p 3.29%
Serco Group (SRP) 96.57p 2.90%
Ultra Electronics Holdings (ULE) 1,413.00p 2.69%
Vedanta Resources (VED) 719.40p 2.60%

FTSE 250 - Fallers

CYBG (CYBG) 288.00p -5.39%
Jupiter Fund Management (JUP) 442.30p -5.15%
Intu Properties (INTU) 200.90p -3.60%
Dunelm Group (DNLM) 549.50p -2.66%
Bakkavor Group (BAKK) 181.10p -2.63%
Hiscox Limited (DI) (HSX) 1,463.00p -2.34%
TI Fluid Systems (TIFS) 262.00p -2.24%
Charter Court Financial Services Group (CCFS) 305.00p -2.20%
Tritax Big Box Reit (BBOX) 143.85p -1.81%
Lancashire Holdings Limited (LRE) 577.50p -1.79%