London midday: Stocks slip into the red as investors mull inflation data
London stocks had fallen into the red by midday on Wednesday as investors mulled the latest reading on UK inflation and eyed an upcoming policy announcement from the Federal Reserve.
The FTSE 100 was down 0.2% 7,426.14, while the pound was up 0.2% against the dollar at 1.2588 and 0.1% firmer versus the euro at 1.1233.
Figures released earlier by the Office for National Statistics showed that consumer level inflation slowed a touch last month, led by a seasonal decline in air fares and a drop in new car prices, but some economists still saw scope for the Bank of England to hike interest rates before the year is out.
Consumer price inflation fell to 2% in May from 2.1% in April, coming in as expected and matching the Bank of England's target. Meanwhile, core inflation declined to 1.7% from 1.8% the month before, coming in ahead of consensus expectations of 1.6%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said CPI inflation is likely to fall below the BoE's 2% target over the coming months in response to the renewed fall in oil prices and the impending reduction in electricity and natural gas prices in October.
"As interest rate changes only affect the economy with a lag and core goods prices aren’t falling like they did throughout the 2000s, the MPC won’t wait until underlying services inflation reaches its pre-crisis norm of 3.5% before raising Bank Rate again," Tombs said.
"As a result, May’s inflation data reinforce our expectation that the Committee will retain its hawkish bias in tomorrow’s meeting and will raise Bank Rate again towards the end of this year, provided a no-deal Brexit is averted."
With the UK inflation data out of the way, attention shifted to the latest policy announcement from the Federal Reserve, due after the close of London markets.
"The indices are hoping that Jerome Powell and his FOMC cronies will be just as dovish as Mario Draghi was on Tuesday morning, with many expecting the Fed to tee-up a July rate cut," said Spreadex analyst Connor Campbell. "However, the central bank’s decision is complicated by Donald Trump, specifically his trade war with China.
"The President is set to meet Xi Jinping for more talks at the G-20 meeting in Osaka next week, the outcome of which could be the key driver of what the Federal Reserve actually does in the coming months."
In equity markets, airlines were under the cosh after HSBC downgraded its stance on British Airways owner IAG and EasyJet following Lufthansa's profit warning earlier this week.
Just Eat slumped after a downgrade to 'neutral' from 'buy' at UBS, while Ted Baker was knocked lower by a downgrade to 'hold' at HSBC.
Housebuilder Berkeley Group was on the back foot as it posted a 20.7% decline in full-year pre-tax profits to £775.2m.
Over-50s products specialist Saga saw its shares fall sharply as it said it was making good progress with its new fixed price motor insurance but cautioned that conditions in its travel and insurance markets are "challenging".
On the upside, Whitbread shook off earlier losses to trade up even as it said first quarter like-for-like revenue per available room at its Premier Inn division fell 6% as Brexit concerns and cost inflation continued to weigh. The food and hotel company, which last year sold the Costa coffee chain to Coca-Cola for £3.9bn, said total UK like-for-like sales were 3.7% lower.
CYBG advanced as the owner of the Yorkshire Bank and Clydesdale Bank announced that it will rebrand as Virgin Money by the end of 2021 and said it was targeting an additional £50m of annual net cost savings on top of existing £150m annual savings form the Virgin Money deal.
Construction and property group Kier racked up strong gains, having taken a beating earlier in the month on the back of a profit warning.
Market Movers
FTSE 100 (UKX) 7,426.14 -0.23%
FTSE 250 (MCX) 19,296.88 -0.08%
techMARK (TASX) 3,631.25 -0.26%
FTSE 100 - Risers
Smith (DS) (SMDS) 358.00p 3.71%
NMC Health (NMC) 2,441.00p 2.52%
Melrose Industries (MRO) 174.15p 2.02%
Royal Bank of Scotland Group (RBS) 219.15p 1.93%
Ashtead Group (AHT) 2,118.00p 1.78%
TUI AG Reg Shs (DI) (TUI) 742.00p 1.50%
Mondi (MNDI) 1,764.00p 1.44%
Schroders (SDR) 3,076.00p 1.32%
Prudential (PRU) 1,680.00p 1.14%
Lloyds Banking Group (LLOY) 58.70p 1.08%
FTSE 100 - Fallers
Just Eat (JE.) 614.60p -3.70%
International Consolidated Airlines Group SA (CDI) (IAG) 441.40p -3.52%
Ocado Group (OCDO) 1,113.50p -3.34%
Marks & Spencer Group (MKS) 215.70p -2.93%
British American Tobacco (BATS) 2,800.50p -2.06%
Experian (EXPN) 2,394.00p -2.01%
easyJet (EZJ) 882.60p -2.00%
Associated British Foods (ABF) 2,401.00p -1.80%
Vodafone Group (VOD) 127.10p -1.61%
Rightmove (RMV) 574.70p -1.53%
FTSE 250 - Risers
Kier Group (KIE) 131.74p 9.87%
CYBG (CYBG) 194.35p 4.80%
Bakkavor Group (BAKK) 132.00p 3.13%
William Hill (WMH) 142.90p 2.99%
John Laing Group (JLG) 382.60p 2.74%
Stobart Group Ltd. (STOB) 107.80p 2.47%
Telecom Plus (TEP) 1,516.00p 2.29%
Euromoney Institutional Investor (ERM) 1,256.00p 2.11%
Renishaw (RSW) 3,888.44p 1.90%
Funding Circle Holdings (FCH) 254.00p 1.60%
FTSE 250 - Fallers
Saga (SAGA) 32.93p -12.41%
Ted Baker (TED) 836.78p -6.51%
Safestore Holdings (SAFE) 609.72p -4.13%
Amigo Holdings (AMGO) 237.00p -3.66%
Games Workshop Group (GAW) 4,826.18p -3.21%
Sirius Minerals (SXX) 13.26p -3.07%
Go-Ahead Group (GOG) 1,891.00p -2.93%
Entertainment One Limited (ETO) 380.40p -2.51%
PZ Cussons (PZC) 213.50p -2.06%
Plus500 Ltd (DI) (PLUS) 568.60p -1.97%