London close: Stocks slip after surprise jump in UK inflation

(Sharecast News) - London's financial markets experienced a downturn on Wednesday, as a surprising increase in UK inflation and sluggish Chinese GDP growth impacted investor sentiment.

The FTSE 100 index closed 1.48% lower at 7,446.29, while the FTSE 250 fared even worse, declining by 1.71% to 18,864.37.

On the currency front, sterling was last up 0.28% on the dollar to trade at $1.2672, while it strengthened 0.39% against the euro, changing hands at €1.1664.

"The FTSE 100's 2024 has gone from bad to worse following this morning's inflation data," said IG chief market analyst Chris Beauchamp.

"Hopes of an early Bank of England rate cut have receded dramatically, leaving the index high and dry.

"While US and European indices are still well up on their October lows, the FTSE 100 is just 2%."

Beauchamp said the fresh UK inflation news hit domestic stocks hard, while international firms like the mining sector took a knock from a stronger dollar driving commodity prices lower.

"This double-whammy spells trouble for the index, and a return to the October lows is a distinct possibility."

UK inflation unexpectedly hastens in December

In economic news, UK inflation saw an unexpected uptick in December, defying predictions of a decline.

Data from the Office for National Statistics showed that the consumer price index climbed to 4%, up from November's 3.9%, contrary to the anticipated drop to 3.8%.

It marked the first increase in inflation since February 2023.

The surge was attributed to a rise in alcohol and tobacco prices, with alcohol and tobacco inflation surging from 10.2% to 12.9%.

Meanwhile, core inflation, excluding food and energy, remained steady at 5.1% for the month of December.

"The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases," said ONS chief economist Grant Fitzner.

"These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.

"Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remain lower than a year ago."

Ruth Gregory, deputy chief UK economist at Capital Economics, said: CPI inflation looked set to rise further in January.

"But favourable base effects will push down inflation in February, March and April.

"CPI inflation in April will also be dragged down by what is shaping up to be a fall in the Ofgem utility price cap of 10% or more.

"As a result, we still think that inflation will be below the 2% target by April and the Bank of England will be in a position to start cutting interest rates by June."

Elsewhere, China recorded another decline in its population, while fourth-quarter gross domestic product (GDP) expanded by 5.2%, narrowly missing estimates of 5.3%.

The country's population decreased to 1.4 billion in 2023, with 11 million deaths and nine million births reflecting the ongoing impact of the "one-child" policy alongside challenges posed by deflation and a slowdown in the property sector.

A comprehensive data release by the National Bureau of Statistics also disclosed that the full-year GDP growth for 2023 matched the fourth-quarter figure, standing at 5.2%, in contrast to a 3% increase in 2022.

Miners in the red, IMI and Smith & Nephew boosted by brokers

On London's equity markets, the mining sector faced downward pressure, with Glencore experiencing a 4.47% decline, while Antofagasta and Anglo American dropped by 2.72% and 2.05%, respectively.

Antofagasta drew additional focus due to a production report.

Housebuilders also saw losses, influenced by inflation data that dampened rate cut expectations, with Persimmon, Barratt Developments and Vistry Group all closing in the red.

Building products supplier Ibstock faced a 2.73% decline after announcing an expected 21% decline in full-year revenues to approximately £405m.

Meanwhile, 888 Holdings tumbled after the owner of William Hill warned that adjusted earnings for 2024 would likely be at the lower end of consensus estimates due to additional investment.

Education publisher Pearson saw a 2.08% decrease in its stock price, despite reporting a strong 2023 financial performance with a 5% increase in underlying group sales and a jump in adjusted operating profit.

Self-storage provider Safestore Holdings experienced an 8.35% decline, even though it surpassed market expectations with its annual results.

Admiral Group faced a 2.08% drop after receiving a downgrade to 'neutral' from 'buy' by UBS.

BP saw a more modest 0.73% decline but was in the spotlight as it appointed its former chief financial officer, Murray Auchincloss, as its permanent chief executive.

On the upside, IMI received a 3.68% boost after an upgrade to 'buy' from 'neutral' by Goldman Sachs, while Smith & Nephew gained 1.41%, driven by an increased price target from Bank of America Merrill Lynch.

Despite a 20% recovery in share price since October's 10-year low, the bank believes Smith & Nephew offered value opportunities in EU MedTech, with potential upside as the share price remains around 10% below the Covid trough.

Keller Group recorded a 2.41% gain as it announced that its 2023 underlying operating profit was expected to significantly exceed market expectations.

Mitchells & Butlers, the owner of Harvester, Toby Carvery, and All Bar One, saw a 2.18% increase in its stock price.

The company said it anticipated full-year results to be at the "top end" of expectations following a robust first-quarter performance, with sales rising strongly during the key festive period, reporting total like-for-like sales up by 7.7% over the previous year.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,446.29 -1.48% FTSE 250 (MCX) 18,864.37 -1.71% techMARK (TASX) 4,268.85 -0.77%

FTSE 100 - Risers

IMI (IMI) 1,608.00p 3.68% Smith & Nephew (SN.) 1,082.00p 1.60% Convatec Group (CTEC) 247.00p 1.56% JD Sports Fashion (JD.) 108.80p 1.35% BAE Systems (BA.) 1,192.00p 0.93% Burberry Group (BRBY) 1,235.00p 0.65% InterContinental Hotels Group (IHG) 7,178.00p 0.03% Beazley (BEZ) 506.00p 0.00% CRH (CDI) (CRH) 5,342.00p -0.04% Relx plc (REL) 3,221.00p -0.09%

FTSE 100 - Fallers

Ocado Group (OCDO) 580.00p -6.15% Entain (ENT) 894.80p -5.19% Persimmon (PSN) 1,395.50p -4.97% Glencore (GLEN) 419.50p -4.47% Land Securities Group (LAND) 641.00p -4.10% Endeavour Mining (EDV) 1,384.00p -4.09% Prudential (PRU) 773.40p -3.95% Unite Group (UTG) 990.00p -3.60% SEGRO (SGRO) 825.20p -3.39% Barratt Developments (BDEV) 519.60p -3.35%

FTSE 250 - Risers

Mitchells & Butlers (MAB) 264.00p 3.61% Trustpilot Group (TRST) 163.00p 2.52% Keller Group (KLR) 842.00p 2.41% Foresight Group Holdings Limited NPV (FSG) 423.00p 1.68% Oxford Instruments (OXIG) 2,155.00p 1.65% Hilton Food Group (HFG) 795.00p 1.27% BH Macro Ltd. GBP Shares (BHMG) 362.50p 1.26% Clarkson (CKN) 3,520.00p 1.00% Games Workshop Group (GAW) 9,980.00p 0.91% TBC Bank Group (TBCG) 2,865.00p 0.88%

FTSE 250 - Fallers

Safestore Holdings (SAFE) 779.00p -8.35% Drax Group (DRX) 497.60p -5.61% OSB Group (OSB) 411.20p -5.60% Me Group International (MEGP) 120.00p -5.51% Mobico Group (MCG) 84.40p -5.38% Jupiter Fund Management (JUP) 73.50p -5.22% Close Brothers Group (CBG) 599.00p -5.07% SDCL Energy Efficiency Income Trust (SEIT) 55.60p -4.96% Crest Nicholson Holdings (CRST) 198.50p -4.93% Primary Health Properties (PHP) 95.45p -4.84%