London close: Stocks struggle after sizzling UK inflation reading

(Sharecast News) - London stocks closed below the waterline on Wednesday, after a grim UK inflation report and an avalanche of data from across the pond. The FTSE 100 ended the session down 0.25% at 7,351.19, and the FTSE 250 was 1.77% lower at 19,112.40.

Sterling was in a mixed state meanwhile, and was last up 0.19% on the dollar at $1.1887, while it was 0.21% weaker against the euro to trade at €1.1442.

"European markets have struggled today, opening lower on the back of the reports of the two Russian missiles which crash landed in Poland, and killed two people in the process," said CMC Markets chief market analyst Michael Hewson.

"It quickly became apparent the incident wasn't a deliberate act, and the explosion was likely caused by a Ukrainian air defence missile that was launched in response to a Russian missile attack."

Hewson said that despite the clarification from the Polish president, as well as NATO, tensions were still high with concerns over an escalation "very much" front-of-mind.

"A higher-than-expected UK inflation number was also a reminder if any were needed that continued sticky inflation was likely to be a significant drag on future earnings potential, not only in the UK, but also in Europe where it is just as high, and in a lot of cases much higher."

In economic news, UK inflation surged further in October according to official data, coming in well above expectations.

The Office for National Statistics said consumer price inflation rose 11.1% year-on-year, up from 10.1% in September and the highest rate since 1981.

Most analysts had been expecting CPI of around 10.7%.

The rate was pushed higher by higher gas and electricity costs - despite the introduction of the 'Energy Price Guarantee' - and rising food prices.

Electricity and natural gas prices surged 88.9%, from 69.8% in September, while food inflation hit 16.4%, the highest since September 1977, compared to 14.6% a month earlier.

The biggest downward contribution was transport, principally motor fuels and second-hand car prices.

Including owner-occupiers housing costs, CPIH rose 9.6% year-on-year, up from 8.8% a month previously.

Housing and household services, including electricity, gas and other fuels, was the largest upward contribution along with food and non-alcoholic beverages.

Core inflation, which strips out more volatile elements, held steady at 6.5%, missing forecasts for 6.4%.

"The real bad news in this report is that the pace of core price rises hasn't eased yet, despite the recent softening in consumer demand," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"The 0.7% month-to-month rise in the core CPI exceeded its average October increase in the 2010s by 0.5 percentage points."

Looking ahead, Tombs was expecting the headline rate of consumer inflation to fall gradually over the coming months, reaching about 9% in March, with October set to be the peak.

"Beyond the first quarter, the outlook for CPI inflation is extremely dependent on the government's approach to subsidising energy prices."

Elsewhere, house price growth slowed sharply in September also according to official data, adding to the deepening economic gloom.

The ONS said UK average house prices increased 9.5% over the year to September, down from 13.1% in August and a high of 15.2% in July.

Between August and September house prices were unchanged on an unadjusted basis, the first time they have stalled on a monthly basis since October 2021.

On a seasonally-adjusted basis they nudged 0.1% higher.

The average price of a house in the UK was £295,000, unchanged on August and £26,000 higher than September 2021.

"September's official data suggest house prices have stalled in the face of surging mortgage rates," said Gabriella Dickens at Pantheon.

"It was inevitable that house prices eventually would succumb to the huge jump in mortgage rates this year: indeed, timelier data suggest that house prices are now firmly falling.

"Admittedly mortgage rates should come down from the very high levels seen in October."

On the industrial relations front, rail workers voted to continue striking in their ongoing dispute over pay and jobs, according to their union.

The Rail, Maritime and Transport (RMT) union said a fresh ballot of members, required under the UK's strict employment laws, showed overwhelming support for action.

It said the average turnout among its members in Network Rail and 14 train operating companies was 70.2% with a 'yes' vote of more than 90%.

Under the law, that means they can take strike action for up to another six months.

"The national executive committee will now look at these fantastic results and negotiations will continue with Network Rail and the train operating companies," said RMT general secretary Mick Lynch.

"This union is determined to continue with this campaign until the employers understand that they need to respond to our members' aspirations on job security, pay and working conditions."

Turning stateside, US retail sales grew more quickly than anticipated in October, with the Department of Commerce reporting that retail sales volumes expanded at a seasonally-adjusted month-on-month pace of 1.3%, to reach $694.5bn.

Economists had pencilled in a rise of 0.9%, while the prior month change was unrevised at flat versus August.

Excluding sales of motor vehicles and parts, retail sales also rose by 1.3% and by a full percentage point when gasoline station sales were also excluded from the equation.

The cost of imported goods in the US meanwhile fell by a bit less than expected last month, for a fourth consecutive monthly decline.

According to the Labor Department, the US import price index slipped at a seasonally-adjusted month-on-month pace of 0.2% in October, ahead of expectations for a 0.5% decline.

Fuel import prices were the chief drag, retreating by 1.3% over the month while those of non-fuel goods dipped by 0.1%.

US industrial production undershot forecasts by a wide margin in another batch of data from the Department of Commerce, amid declines in mining and utilities output.

Total production ticked lower by one-tenth of a percentage point month-on-month in October, compared to expectations for a 0.2% rise.

By industry groups, manufacturing production increased by 0.1% over the month, while that in mining and utilities recorded drops of 0.4% and 1.5%, respectively.

Finally on data, US home builder sentiment fell in November for the 11th month in a row amid high interest rates and rising costs.

The National Association of Home Builders (NAHB) index of activity and sentiment declined to 33 from 38 the month before, coming in below expectations of 36.

"Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce," said NAHB chairman Jerry Konter.

"With the housing sector in a recession, the Biden administration and new Congress must turn their focus to policies that lower the cost of building and allow the nation's home builders to expand housing production."

On London's equity markets, inspection, product testing and certification company Intertek Group fell 3.3% after a disappointing update from Swiss peer SGS.

Carnival tumbled 13.79% after the cruise operator announced plans to raise $1bn with convertible senior notes to make principal payments on debt and for general corporate purposes.

CMC Markets slid 12.69% even after it reported a rise in first-half net operating income amid increased activity.

British Land was in the red by 1.11%, despite posting a big jump in first-half profits on the back of "strong" rental growth and cost control.

Insurer Beazley lost 3.28% after it raised £350m in a discounted placing to support organic growth and provide growth capital to fund "attractive" underwriting opportunities.

On the upside, software firm Sage jumped 7.33% after full-year revenues beat expectations, while defence company BAE Systems rose 4.22%, likely on the back of the explosion near the Ukraine border in Poland overnight.

SSE reversed earlier losses to eke out gains of 0.03%, after the UK energy generator swung to an interim loss in what it called "unprecedented market volatility", with gas storage earnings amid soaring prices offsetting weaker earnings from renewables.

Hill & Smith rallied 5.31% after the infrastructure provider said annual profits were set to be at the upper end of guidance, driven by strong trading and foreign exchange tailwinds.

Experian was in the black by 2.56% after the credit-checking firm reported a jump in first-half revenues, supported by the launch of new products.

In broker note action, Kainos Group was lifted 4.79% by an upgrade to 'buy' at Berenberg, while Future slid 2.32% after an initiation at 'overweight' at JPMorgan.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,351.19 -0.25% FTSE 250 (MCX) 19,112.40 -1.77% techMARK (TASX) 4,341.97 0.13%

FTSE 100 - Risers

Sage Group (SGE) 811.20p 7.33% BAE Systems (BA.) 769.80p 4.22% Haleon (HLN) 288.05p 3.21% Experian (EXPN) 2,928.00p 2.56% Reckitt Benckiser Group (RKT) 5,784.00p 1.97% GSK (GSK) 1,374.40p 1.49% Vodafone Group (VOD) 97.16p 1.32% Imperial Brands (IMB) 2,053.00p 1.28% Aviva (AV.) 442.90p 1.26% Bunzl (BNZL) 3,011.00p 1.14%

FTSE 100 - Fallers

Ocado Group (OCDO) 726.00p -5.74% Rightmove (RMV) 540.60p -4.49% Rolls-Royce Holdings (RR.) 87.22p -4.27% International Consolidated Airlines Group SA (CDI) (IAG) 133.26p -4.25% Hargreaves Lansdown (HL.) 871.20p -4.22% Dechra Pharmaceuticals (DPH) 2,764.00p -4.03% JD Sports Fashion (JD.) 114.80p -4.01% Schroders (SDR) 449.40p -3.83% Harbour Energy (HBR) 333.70p -3.47% Intertek Group (ITRK) 3,994.00p -3.30%

FTSE 250 - Risers

Hill and Smith (HILS) 1,150.00p 5.31% Kainos Group (KNOS) 1,510.00p 4.79% Vietnam Enterprise Investments (DI) (VEIL) 509.00p 1.80% Warehouse Reit (WHR) 117.00p 1.39% Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 310.00p 1.31% Abrdn Private Equity Opportunities Trust (APEO) 426.00p 1.16% Drax Group (DRX) 570.00p 1.06% VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 396.00p 1.02% Tate & Lyle (TATE) 710.20p 1.00% Morgan Advanced Materials (MGAM) 312.00p 0.97%

FTSE 250 - Fallers

Carnival (CCL) 727.40p -13.79% CMC Markets (CMCX) 234.00p -12.69% Bridgepoint Group (Reg S) (BPT) 213.60p -8.72% Aston Martin Lagonda Global Holdings (AML) 121.85p -8.45% Syncona Limited NPV (SYNC) 172.80p -6.49% easyJet (EZJ) 390.80p -6.22% IP Group (IPO) 68.25p -6.19% 888 Holdings (DI) (888) 95.65p -5.86% Wizz Air Holdings (WIZZ) 2,170.00p -5.69% TUI AG Reg Shs (DI) (TUI) 145.95p -5.69%