London close: Stocks mixed on cooler-than-expected US producer inflation

Persimmon
1,232.00p
16:45 07/02/25
London's equity markets closed Tuesday in mixed territory as investors assessed new producer price data from across the pond, as well as the implications of a heavily oversubscribed UK government bond auction.
Aerospace and Defence
12,170.90
16:49 07/02/25
Barratt Redrow
434.80p
17:15 07/02/25
BP
433.25p
17:15 07/02/25
British American Tobacco
3,348.00p
17:15 07/02/25
Chemring Group
297.50p
17:15 07/02/25
Crest Nicholson Holdings
171.40p
17:15 07/02/25
Financial Services
18,228.29
16:49 07/02/25
Food & Drug Retailers
4,602.46
16:49 07/02/25
FTSE 100
8,700.53
17:09 07/02/25
FTSE 250
20,807.84
16:50 07/02/25
FTSE 350
4,769.06
16:50 07/02/25
FTSE All-Share
4,718.95
17:14 07/02/25
Games Workshop Group
14,290.00p
17:15 07/02/25
General Retailers
4,840.01
16:49 07/02/25
Household Goods & Home Construction
10,789.29
16:49 07/02/25
IntegraFin Holding
357.50p
16:35 07/02/25
JD Sports Fashion
82.30p
16:40 07/02/25
Marks & Spencer Group
347.90p
17:08 07/02/25
Ocado Group
327.70p
17:00 07/02/25
Oil & Gas Producers
8,504.37
16:49 07/02/25
Taylor Wimpey
116.50p
17:10 07/02/25
Tobacco
38,967.52
16:49 07/02/25
The FTSE 100 index fell 0.28% to finish at 8,201.54 points, while the FTSE 250 rose 0.24% to 19,766.27 points.
In currency markets, sterling was last down 0.26% on the dollar to trade at $1.2180, as it held relatively steady against the euro, changing hands at €1.1837.
“In recent weeks it has felt like it is bond traders versus the UK chancellor,” said XTB research director Kathleen Brooks.
“As UK bond yields have risen sharply in recent weeks, calls have grown for the Chancellor to step down, with many blaming her budget for the relentless rise in UK borrowing costs and the drop in the pound.
“Rachel Reeves addressed parliament on Tuesday - she sounded self-assured and confident, not like someone whose job is one the line, and the bond market is stable in the aftermath of her speech.”
However, Brooks noted that Reeves did not deliver a “knockout blow”, explaining that aside from defending her position as Chancellor and promising to boost economic growth, she had not produced “any concrete measures” on how she would stabilise the UK’s finances.
“In fairness, no one expected her to list spending cuts, but financial markets may not give Reeves a long reprieve.
“UK bond yields may be stable on the back of her speech, but they are not in recovery mode.
“Added to this, the pound is once again moving lower, which could be an ominous sign that investors are getting ready to sell UK debt once more if we get some weak economic data later this week.”
US wholesale inflation rises less than expected, UK bond auction significantly oversubscribed
In economic news, US wholesale inflation rose modestly in December, falling short of expectations, primarily due to elevated energy prices.
The producer price index (PPI) increased 0.2% last month, easing from November’s 0.4% gain.
On an annual basis, PPI rose 3.3%, slightly down from 3.4% in the prior month.
Prices for final demand services remained flat, while those for final demand goods climbed 0.6%.
Excluding volatile components such as food, energy, and trade services, core PPI edged up 0.1% in December, maintaining a 3.3% annual increase.
Market attention was now shifting to Wednesday's consumer price index (CPI), with expectations for a 0.3% monthly increase and a 2.8% annual rise.
Optimism among US small businesses meanwhile surged to its highest level in over six years, buoyed by a positive economic outlook following recent elections.
The NFIB Small Business Optimism Index climbed to 105.1 in December, up from 101.7 in November and significantly exceeding analysts’ forecast of 100.8.
That marked the second consecutive month above the historic average of 98 and the highest level since October 2018.
A record 52% of respondents expressed confidence in economic improvement, the highest proportion since 1983.
Business expansion plans and expectations for increased sales also improved.
However, a net 29% reported raising compensation, the lowest level since March 2021.
“Small business owners feel more certain and hopeful about the economic agenda of the new administration,” said the NFIB's chief economist Bill Dunkelberg.
“Expectations for economic growth, lower inflation, and positive business conditions have increased in anticipation of pro-business policies and legislation in the new year.”
On home shores, a UK government bond auction highlighted continued investor interest despite market turmoil.
The Debt Management Office (DMO) revealed that bids for ÂŁ1bn of 1.25% Index-linked Treasury Gilt 2054 totaled ÂŁ3.06bn, reflecting a subscription rate three times higher than the issuance.
That strong demand came amid rising gilt yields and concerns about fiscal stability, including persistent inflation and higher interest rates.
“Most, but not all, of the rise in the 10-year gilt yield, from 4.0% at the start of the fourth quarter 2025 to 4.9% now reflects that the market is now pricing in our view that cost-push inflation will stop the Bank of England from cutting interest rates more than twice in 2025,” said Andrew Wishart, senior UK economist at Berenberg.
“In October, markets were pricing in a reduction in Bank Rate to 3.5% by the end of year; now investors anticipate only one or two cuts, to 4.25% or 4.5%.
“The UK bond sell-off is more worrying than that in the US, due to the simultaneous fall in the pound - that points to some genuine capital flight.”
Housebuilders in the green, JD Sports falls on guidance cut
On London’s equity markets, Persimmon climbed 5.68% after the housebuilder announced that its full-year underlying pre-tax profit would likely reach the upper end of market expectations, with completions surpassing forecasts.
Sector peers Barratt Redrow, Taylor Wimpey, and Crest Nicholson Holdings also posted gains, rising 1.28%, 2.81%, and 2.94%, respectively.
Crest Nicholson recovered earlier losses after delaying its full-year results due to increased fire safety provisions, which were now expected to total ÂŁ245m to ÂŁ255m, up by ÂŁ120m to ÂŁ130m.
Elsewhere, Ocado Group surged 9.52% after its joint venture with Marks and Spencer, Ocado Retail, reported robust growth.
Fourth-quarter sales jumped 17.5% year-on-year to ÂŁ715.8m, accelerating from 15.5% growth in the prior quarter.
Weekly orders reached 500,000 for the first time, with a record performance over the Christmas trading period.
Marks and Spencer slipped 1.5% by the close, however, despite the strong results at its Ocado partnership.
IntegraFin Holdings rose 4.67% after reporting a record quarter for funds under direction on its Transact platform, which reached ÂŁ65.9bn, a 3% increase over the quarter and a 14% rise year-on-year.
Chemring Group gained 1.41% after its subsidiary, Roke, secured a multi-year, ÂŁ26m contract to supply radar altimeters to a US prime contractor, with production set to begin in 2025.
On the downside, JD Sports Fashion plunged 6.36% after cutting its full-year pre-tax profit forecast to ÂŁ915m to ÂŁ935m, down from ÂŁ955m to ÂŁ1.035bn, citing weaker November and December sales in challenging markets.
Energy giant BP fell 2.74% after it flagged lower fourth-quarter upstream production and higher-than-expected tax charges and foreign exchange losses for the year.
British American Tobacco dropped 1.06% after Reinet Investments fully exited its stake in the company, selling 43.3m shares at 2,820p each, raising ÂŁ1.2bn.
Games Workshop Group also slid 5.97% despite reporting record first-half results, with the decline attributed to profit-taking after strong earlier gains.
Reporting by Josh White for Sharecast.com.
Market Movers
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