London midday: Stocks fall further ahead of US inflation reading

(Sharecast News) - London stocks had fallen further by midday on Wednesday as investors mulled weaker-than-expected UK GDP data and looked ahead to the latest US inflation reading. The FTSE 100 was 0.4% lower at 7,500.46, while sterling was down 0.1% against the dollar at 1.2477.

Figures released earlier by the Office for National Statistics showed the economy contracted more than expected in July as strikes and poor weather took their toll.

GDP shrank 0.5% following 0.5% growth in June, and versus consensus expectations of a 0.2% decline.

Services output fell 0.5% following 0.2% growth in June, and was the main contributor to the fall in GDP in July.

Meanwhile, production output was down 0.7% in July following 1.8% growth the month before, and output in the construction sector declined 0.5% after growth of 1.6% in June.

ONS director of economic statistics Darren Morgan said: "In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather.

"Manufacturing also fell back following its rebound from the effect of May's extra Bank Holiday.

"A busy schedule of sporting events and increased theme park visits provided a slight boost."

Paul Dales, chief UK economist at Capital Economics, said: "The 0.5% m/m fall in real GDP in July...could possibly mean that the mild recession we have been expecting has begun.

"Even so, with wage growth still uncomfortably strong, we suspect the Bank of England will still raise interest rates one final time next week, from 5.25% to 5.50%."

Market participants were also looking to the US consumer price index for August, which is due at 1330 BST.

Russ Mould, investment director at AJ Bell, said: "All eyes are on US inflation numbers set to be released later today as this data is crucial to the Federal Reserve's decision-making on whether to keep raising interest rates or not.

"Core CPI is forecast to ease back from a 12-month rate of 4.7% in July to 4.3% in August. Falling inflation is exactly what the market wants, as it would give the Fed less of a reason to keep raising rates. However, Core CPI excludes food and energy, and the latter is a pressure point once again."

In equity markets, housebuilder Redrow rallied despite saying that weekly sales over the summer had almost halved due to rising mortgage costs amid a "challenging" market and revealing a fall in full-year profits. Victoria Scholar, head of investment at Interactive Investor, said full-year underlying pre-tax profit came in ahead of analysts' expectations.

Persimmon, Berkeley, Taylor Wimpey, Barratt, Vistry and Bellway also rose.

Insurer Aviva gained after agreeing to sell its 25.9% stake in Singapore Life Holdings (Singlife), together with two debt instruments, to Sumitomo Life for £800m in cash.

BP was in the red as it announced late on Tuesday that chief executive Bernard Looney has resigned after failing to fully disclose details of past relationships with colleagues.

Market Movers

FTSE 100 (UKX) 7,500.46 -0.36% FTSE 250 (MCX) 18,446.25 -0.52% techMARK (TASX) 4,321.10 -0.42%

FTSE 100 - Risers

Persimmon (PSN) 1,053.50p 2.98% Aviva (AV.) 385.10p 2.34% Berkeley Group Holdings (The) (BKG) 4,079.00p 1.95% Taylor Wimpey (TW.) 117.35p 1.91% HSBC Holdings (HSBA) 608.50p 1.88% Barratt Developments (BDEV) 443.60p 1.56% Barclays (BARC) 155.86p 1.48% Whitbread (WTB) 3,614.00p 0.92% Fresnillo (FRES) 584.40p 0.72% Melrose Industries (MRO) 482.60p 0.69%

FTSE 100 - Fallers

Ocado Group (OCDO) 773.40p -3.52% JD Sports Fashion (JD.) 136.30p -2.95% Halma (HLMA) 2,106.00p -2.68% Croda International (CRDA) 4,907.00p -2.45% Severn Trent (SVT) 2,375.00p -1.98% Reckitt Benckiser Group (RKT) 5,662.00p -1.97% Antofagasta (ANTO) 1,421.00p -1.93% Flutter Entertainment (CDI) (FLTR) 13,905.00p -1.90% Coca-Cola HBC AG (CDI) (CCH) 2,237.00p -1.89% SSE (SSE) 1,592.50p -1.70%

FTSE 250 - Risers

Redrow (RDW) 495.40p 4.74% Wizz Air Holdings (WIZZ) 2,038.00p 3.37% Ithaca Energy (ITH) 157.90p 2.93% Bellway (BWY) 2,192.00p 2.43% Ibstock (IBST) 147.60p 1.79% W.A.G Payment Solutions (WPS) 92.40p 1.54% Renishaw (RSW) 3,654.00p 1.44% Vistry Group (VTY) 918.00p 1.44% Virgin Money UK (VMUK) 164.05p 1.14% Travis Perkins (TPK) 823.80p 1.08%

FTSE 250 - Fallers

Bakkavor Group (BAKK) 97.00p -5.37% Watches of Switzerland Group (WOSG) 587.50p -5.01% Helios Towers (HTWS) 86.85p -4.72% 4Imprint Group (FOUR) 4,865.00p -3.47% Serco Group (SRP) 145.70p -2.80% Bridgepoint Group (Reg S) (BPT) 193.70p -2.66% NCC Group (NCC) 92.20p -2.64% TI Fluid Systems (TIFS) 121.00p -2.58% C&C Group (CDI) (CCR) 134.40p -2.47% Pennon Group (PNN) 590.00p -2.24%