London close: Weak data and trade tensions hit stocks
London stocks finished sharply lower on Wednesday as the latest inflation data boosted the pound, even as weak economic data released in China and Germany pointed to slower growth ahead and a top US official reportedly downplayed talk of a thaw in US-China trade relations.
The FTSE 100 ended the session down by 1.42% at 7,147.88 with a brief inversion in the US and UK yield curves during the morning adding to fears of a looming recession.
By the close of markets in London, that was no longer the case in the States - albeit by just a slim margin - and some economists pointed out that in the case of Britain, the interest rate curve was a less reliable indicator.
Nonetheless, it was the first inversion since 2007.
"Perhaps the big worry is that there seems to be no over-arching plan behind the [US President's] actions – if there was a plan, with a definable end-game, then investors might be prepared to be patient, but the Trump administration’s ad-hoc approach suggests the chaos will continue, and points towards an absence of global coordination to any sustained downturn, since the US is busily burning its bridges with key trading partners," said IG's Chris Beauchamp.
In parallel, sterling ticked up 0.04% against the US dollar to 1.2065 and by 0.32% versus the euro to 1.0830 after figures from the Office for National Statistics showed inflation rose faster than expected in July, overshooting the Bank of England's 2% target.
Consumer price inflation came in at 2.1% in the year to July, up from 2% in June and coming in above expectations for a decline to 1.9%. In its August Inflation Report, the BoE had projected a drop to 1.8%.
Meanwhile, core inflation increased to 1.9% from 1.8%, coming above the no-change consensus.
Ruth Gregory, senior UK economist at Capital Economics, said the figures may dampen speculation that the Bank of England may soon follow in the Fed’s footsteps and cut interest rates.
"Indeed, with the ongoing strength in pay growth and the fall in the pound likely to leave inflation above the 2% target in 2020, we still think that it is only in a no deal Brexit that the MPC will cut rates."
Further afield, German GDP figures for the second quarter revealed a contraction in growth of 0.1% for the latest three-month stretch, while the latest industrial production figures out of China came in well beneath economists' forecasts and revealed output rising at its slowest pace for 17 years in July.
Separate reports on retail sales and fixed asset investment in China also missed forecasts by a wide margin.
Capping it all off, CNBC's Kayla Tausche reported that a senior US administration official had said that Washington's latest tariff reprieve was "not at all" an indication of a thaw in US-China relations.
In equity markets meanwhile, Mike Ashley's Sports Direct tumbled as it announced that Grant Thornton has quit after more than a decade as its auditor, leaving the company less than a month to find a new one.
Auto Trader was under the cosh as it emerged that Volkswagen's financial services unit is bringing its used car website, Heycar, to the UK.
On the upside, insurer Admiral rallied as it said interim pre-tax profits rose 4% to £218.2m as its UK household insurance business swung to a £4.2m profit from a £1.9m loss last year.
Balfour Beatty surged as the construction group posted a jump in first-half pre-tax profit and said it was on track to deliver a full-year performance in line with market expectations.
FTSE 250 cybersecurity company Avast gained after saying that full-year revenue growth will be at the upper end of its high single-digit percentage range following a solid first half.
FTSE 100 - Risers
Admiral Group (ADM) 2,115.00p 4.08%
Direct Line Insurance Group (DLG) 296.20p 1.23%
Unilever (ULVR) 4,967.00p 1.22%
United Utilities Group (UU.) 774.20p 1.18%
Severn Trent (SVT) 1,976.00p 0.89%
National Grid (NG.) 842.80p 0.68%
Fresnillo (FRES) 684.00p 0.29%
Diageo (DGE) 3,407.00p 0.22%
Centrica (CNA) 65.50p 0.21%
Tesco (TSCO) 214.30p 0.09%
FTSE 100 - Fallers
Melrose Industries (MRO) 162.95p -5.75%
Evraz (EVR) 527.40p -5.21%
NMC Health (NMC) 1,801.50p -4.88%
Ashtead Group (AHT) 2,071.00p -4.56%
TUI AG Reg Shs (DI) (TUI) 775.00p -4.34%
International Consolidated Airlines Group SA (CDI) (IAG) 425.10p -4.34%
Prudential (PRU) 1,434.00p -4.11%
Anglo American (AAL) 1,789.00p -4.02%
Hargreaves Lansdown (HL.) 1,876.50p -4.02%
Mondi (MNDI) 1,565.50p -3.78%
FTSE 250 - Risers
Balfour Beatty (BBY) 222.80p 9.32%
Avast (AVST) 356.00p 8.67%
Intu Properties (INTU) 39.35p 8.40%
Funding Circle Holdings (FCH) 119.60p 3.64%
Woodford Patient Capital Trust (WPCT) 44.95p 2.39%
McCarthy & Stone (MCS) 135.70p 2.11%
Man Group (EMG) 161.15p 2.03%
Oxford Instruments (OXIG) 1,312.00p 1.71%
Clarkson (CKN) 2,390.00p 1.70%
Grainger (GRI) 230.20p 1.59%
FTSE 250 - Fallers
Sports Direct International (SPD) 214.00p -10.01%
Premier Oil (PMO) 67.24p -9.60%
Wood Group (John) (WG.) 438.80p -7.31%
Cairn Energy (CNE) 158.70p -6.98%
Sirius Minerals (SXX) 8.84p -6.89%
Polypipe Group (PLP) 374.60p -5.55%
Elementis (ELM) 133.20p -5.53%
Royal Mail (RMG) 194.90p -5.11%
Cineworld Group (CINE) 220.40p -4.84%
CYBG (CYBG) 137.30p -4.79%