London midday: FTSE stays down ahead of Fed decision, after UK inflation

(Sharecast News) - London stocks were still a little lower by midday on Wednesday as investors digested UK inflation data and erred on the side of caution ahead of a rate decision from the US Federal Reserve. The FTSE 100 was 0.2% lower at 7,485.22, while sterling was 0.1% firmer against the dollar at 1.2383.

Figures released earlier by the Office for National Statistics showed that consumer price inflation eased to 10.7% in the 12 months to November from a 41-year high of 11.1% in October, as transport costs fell back. Analysts had been expecting 10.9%.

The largest downward contribution came from transport, after the price of motor fuels and second-hand cars eased, alongside declines in tobacco, clothing and footwear, and games, toys and hobbies. That was partially offset, however, by prices hikes for alcohol in restaurants, cafes and pubs.

The Bank of England has previously stated that it expects inflation to peak at the end of 2022 before falling steadily throughout 2023. Interest rates now stand at 3.0% after a series of hikes throughout the year, and most economists expect another rise when the Monetary Policy Committee meets on Thursday.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Inflation may be past the peak but given that prices for UK consumers have scaled a mountain, there is still a vertiginous descent to navigate before it's back down to less dangerous levels.

"Lower fuel and second-hand car prices have helped bring down the headline CPI rate but price pain continues in many parts of the economy with increases in alcohol costs in pubs, cafes and restaurants particularly onerous.

"The Bank of England is still expected to raise rates by 0.5% tomorrow, increasing borrowing costs yet again for households and businesses, to try and shove away demand and push prices down. The dark clouds hovering as a recession rolls in are likely to hasten the path lower, but policymakers will still want to tread carefully, fearful that the economy could be shoved into a deep crevasse of contraction if rate rises are too steep.

"It's likely that the next moves by the Bank of England will be more moderate 0.25% hikes with an expectation of reaching 4.75% by the middle of 2023."

Looking ahead to the rest of the day, the US rate announcement is due after the close of European markets, at 1900 GMT, amid expectations of a 50-basis points hike.

In equity markets, holiday giant TUI slumped after saying it would raise cash to repay state support during the Covid pandemic. It also posted a return to annual profits and said underlying earnings would increase significantly in 2023, despite market uncertainty.

Watches of Switzerland was under the cosh even as it backed its full-year guidance and reported a rise in first-half profit and revenue amid solid demand.

BA and Iberia owner IAG and Wizz Air flew lower after a revenue warning from US airline JetBlue Airways.

Housebuilders Taylor Wimpey and Redrow were knocked lower by rating downgrades at JPMorgan Cazenove, while miner Rio Tinto fell after a downgrade to 'underweight' by JPM.

On the upside, BT Group gained after Nokia announced the expansion of its partnership with the telecoms group in a five-year deal for its AVA Analytics software for fixed networks.

Volution rallied after it said group revenue for the four months to 30 November rose 7% thanks to a combination of volume and price increases, with all three geographic regions growing organically.

Market Movers

FTSE 100 (UKX) 7,485.22 -0.24% FTSE 250 (MCX) 19,008.46 -0.41% techMARK (TASX) 4,415.01 -0.29%

FTSE 100 - Risers

Fresnillo (FRES) 879.80p 2.88% BT Group (BT.A) 117.00p 2.72% Harbour Energy (HBR) 318.70p 2.41% Admiral Group (ADM) 2,080.00p 1.36% Centrica (CNA) 91.28p 0.84% Compass Group (CPG) 1,914.00p 0.79% BAE Systems (BA.) 827.40p 0.78% British Land Company (BLND) 398.00p 0.68% Land Securities Group (LAND) 632.60p 0.67% BP (BP.) 473.75p 0.57%

FTSE 100 - Fallers

Ocado Group (OCDO) 672.60p -3.91% International Consolidated Airlines Group SA (CDI) (IAG) 131.78p -2.56% Rio Tinto (RIO) 5,646.00p -1.76% Auto Trader Group (AUTO) 559.60p -1.72% Sainsbury (J) (SBRY) 218.40p -1.71% Flutter Entertainment (CDI) (FLTR) 11,890.00p -1.65% Anglo American (AAL) 3,152.50p -1.64% Taylor Wimpey (TW.) 102.50p -1.63% Airtel Africa (AAF) 115.50p -1.62% Halma (HLMA) 2,152.00p -1.56%

FTSE 250 - Risers

Ferrexpo (FXPO) 162.80p 5.65% Hochschild Mining (HOC) 72.10p 5.18% UK Commercial Property Reit Limited (UKCM) 60.30p 2.73% Syncona Limited NPV (SYNC) 192.00p 2.45% Elementis (ELM) 119.90p 2.30% Hammerson (HMSO) 23.80p 2.01% Volution Group (FAN) 357.00p 1.85% Direct Line Insurance Group (DLG) 216.10p 1.60% HarbourVest Global Private Equity Limited A Shs (HVPE) 2,205.00p 1.38% Morgan Advanced Materials (MGAM) 308.00p 1.32%

FTSE 250 - Fallers

Watches of Switzerland Group (WOSG) 891.50p -7.04% TUI AG Reg Shs (DI) (TUI) 137.85p -6.64% Wizz Air Holdings (WIZZ) 2,276.00p -5.56% Molten Ventures (GROW) 378.60p -5.02% Aston Martin Lagonda Global Holdings (AML) 154.90p -4.59% ASOS (ASC) 542.00p -4.58% Moonpig Group (MOON) 114.80p -3.85% Bridgepoint Group (Reg S) (BPT) 197.90p -3.37% Helios Towers (HTWS) 112.80p -3.18% Hilton Food Group (HFG) 513.00p -3.02%