London midday: Stocks pare gains ahead of Fed, after UK inflation
London stocks had pared gains by midday on Wednesday as investors digested news that inflation jumped past the Bank of England’s 2% target in May for the first time in nearly two years and looked ahead to the latest policy announcement from the Federal Reserve.
The FTSE 100 was up 0.2% at 7,188.17, having earlier hit a fresh post-pandemic high, while sterling was up 0.2% against the dollar at 1.4112.
Figures from the Office for National Statistics showed that consumer price inflation rose to 2.1% in May from 1.5% in April, coming in above expectations for a reading of 1.8% as more businesses reopened after Covid restrictions were eased. It also marked the highest consumer price inflation reading since July 2019.
Meanwhile, core inflation - which strips out volatile elements such as food and energy - increased to 2% in May from 1.3% the month before, coming in above consensus expectations of 1.5%.
The ONS said the largest upward contribution to the inflation rate came from transport. Rising prices for clothing, motor fuel, recreational goods, and meals and drinks consumed out also contributed.
ONS chief economist Grant Fitzner said: "The rate of inflation rose again in May and is now above 2% for the first time since the summer of 2019.
"This month’s rise was led by fuel prices which fell this time last year, but have jumped this year thanks to rising crude prices. Clothing prices also added upward pressure as the amount of discounting fell in May."
After the European close, all eyes will be on the latest policy announcement from the US Fed.
IG market analyst Joshua Mahony said: "Unlike the Fed, the BoE does not have a policy of average inflation targeting which allows above-target prices for a period of time. Nonetheless, the BoE is likely to take a similar approach to the Fed for now, with base effects and reopening adjustments bringing a potential short-term spike that could prove fleeting.
"That topic of transitory inflation will be key as we look towards the FOMC meeting today, with the Fed looking unlikely to move the dials this time around. Instead, there is likely to be a focus on the latest dot plot and inflation projections, alongside questions around to what degree the Fed have discussed tapering in forthcoming meetings."
In equity markets, Tullow Oil gushed higher after saying its production to the end of May was in line with expectations and that it is increasing the volume of oil it protects with hedging to 75% of the group’s output for the next two years.
On the downside, mining stocks were under pressure after Chinese industrial production and retail sales data missed expectations. Glencore, Anglo American, Antofagasta and BHP well all lower.
Telecommunications company Helios Towers slumped after a share placing, while Hipgnosis fell after the music rights buyer said it planned to raise £150m in a share placing to fund what it called a "substantial" pipeline of songs.
FTSE 100 - Risers
Bunzl (BNZL) 2,356.00p 2.26%
Johnson Matthey (JMAT) 3,205.00p 2.10%
BT Group (BT.A) 201.30p 2.00%
Flutter Entertainment (CDI) (FLTR) 13,570.00p 1.76%
Sage Group (SGE) 683.40p 1.70%
B&M European Value Retail S.A. (DI) (BME) 559.20p 1.67%
Rolls-Royce Holdings (RR.) 109.70p 1.57%
Reckitt Benckiser Group (RKT) 6,699.00p 1.44%
Weir Group (WEIR) 1,898.50p 1.42%
Ferguson (FERG) 9,950.00p 1.34%
FTSE 100 - Fallers
Glencore (GLEN) 312.15p -2.76%
Anglo American (AAL) 2,939.00p -2.00%
Antofagasta (ANTO) 1,446.50p -1.50%
Evraz (EVR) 619.20p -1.50%
Fresnillo (FRES) 826.80p -1.34%
Associated British Foods (ABF) 2,337.00p -1.27%
BHP Group (BHP) 2,109.00p -1.03%
British Land Company (BLND) 500.40p -0.99%
Land Securities Group (LAND) 696.40p -0.97%
British American Tobacco (BATS) 2,820.50p -0.88%
FTSE 250 - Risers
Network International Holdings (NETW) 387.50p 3.09%
Pets at Home Group (PETS) 468.00p 2.45%
Watches of Switzerland Group (WOSG) 849.00p 2.04%
Centamin (DI) (CEY) 111.40p 1.87%
Elementis (ELM) 152.90p 1.73%
Lancashire Holdings Limited (LRE) 630.50p 1.69%
Syncona Limited NPV (SYNC) 214.00p 1.66%
easyJet (EZJ) 948.00p 1.65%
Tullow Oil (TLW) 65.40p 1.62%
Clarkson (CKN) 3,145.00p 1.62%
FTSE 250 - Fallers
Hammerson (HMSO) 39.48p -4.57%
Helios Towers (HTWS) 165.60p -3.83%
Ferrexpo (FXPO) 436.60p -3.58%
Indivior (INDV) 150.90p -3.21%
TI Fluid Systems (TIFS) 311.00p -3.12%
BlackRock World Mining Trust (BRWM) 607.00p -3.04%
Oxford Biomedica (OXB) 1,272.00p -2.90%
Capital & Counties Properties (CAPC) 166.10p -2.75%
UK Commercial Property Reit Limited (UKCM) 78.20p -2.74%
Mediclinic International (MDC) 318.80p -2.69%