London open: FTSE falls as slowdown in inflation not expected to last

(Sharecast News) - London stocks fell in early trade on Wednesday as an easing in UK inflation was expected to be short lived, and after Donald Trump threatened once again to resume strikes on Iran. At 0825 BST, the FTSE 100 was 0.4% lower at 10,290.99, while sterling was flat against the dollar at 1.3390. Brent crude was off 1% at $110.20 a barrel.

Investors were digesting the latest figures from the Office for National Statistics, which showed that inflation eased in April despite the war in the Middle East, although the slowdown was not expected to last.

The consumer prices index rose 2.8% in the 12 months to April, down from 3.3% in March and below consensus for 3%. The fall was driven by lower electricity and gas prices, following a reduction in the regulator's cap on charges on 1 April.

There were also smaller rises in water and sewage bills, and in vehicle excise duty, while food price inflation fell to 3% from 3.7% in the 12 months to April.

That was only partially offset by a rise in petrol and diesel prices, and in clothing and footwear prices, which rose 0.7%, all but reversing March's 0.8% decline.

Core inflation, which strips out more volatile energy, food, alcohol and tobacco prices, rose by 2.5%, down on March's 3.1% rise, while CPI including owner occupiers' housing costs slowed to 3% from 3.4%.

Patrick Munnelly at Tickmill Group said the CPI print looks dovish on the surface but is unlikely to change the Monetary Policy Committee's forward-looking debate much.

He said that while the fall in headline inflation looks striking against a global energy crisis, it reflects UK-specific mechanics. He pointed to the lagged energy price cap, government policy changes, and base effects from last year's water bills and vehicle excise duty increases not being repeated on the same scale.

"The downside surprise likely also owes something to Easter timing depressing package holiday prices - a distortion that should reverse quickly," he said, adding that food inflation easing by 0.7ppts was "helpful but not decisive".

"The bigger point is that April's CPI is likely to be short-lived relief," Munnelly said. "Direct and indirect fuel effects from the Iran shock should push CPI back above 3% y/y and into letter-writing territory. Services inflation dropped sharply to 3.2% y/y from 4.5%, but given the weight of survey evidence and the likelihood of holiday-price distortions, the MPC will be cautious about extrapolating."

He said that Tuesday's labour market data was more genuinely soft, giving "the wait-and-see camp cover, even if the inflation outlook is about to worsen again".

Trump's latest comments on Iran were also in focus after he told reporters at the White House on Tuesday that he was "an hour away" from deciding whether to strike Iran before he was convinced to call it off for a few days.

When asked how close he was to ordering an attack, Trump told reporters the US was "all set to go" and "it would have been happening right now".

Asked how long Iran has to make a deal, Trump said he was giving Tehran "two to three days" and that the US "is not leaving Iran yet" and is "going to do it right". Meanwhile, a spokesman for Iran's army warned that Tehran would open new fronts if attacked.

Looking ahead to the rest of the day, attention will turn to first-quarter results from US chip giant Nvidia, due after the close of markets. Kathleen Brooks, research director at XTB, said analysts expect the company to report revenues of $79.1bn, up 80% in a year, earnings per share of $1.77, and net income, or profit of $43.13bn, more than double compared to a year ago.

"The market is expecting another monster report later tonight, however, the question is whether Nvidia can continue to beat expectations and if forward guidance will be enough to wow a market that is taking a breather after an epic rally," she said.

In UK equity markets, Severn Trent rallied as the water utility lifted its 2028 adjusted earnings per share outlook to at least 250p from 224p following "another year of exceptional growth". United Utilities also gained.

RS Group and Playtech shot higher after final results and a trading update, respectively.

Retailer Marks & Spencer rose as it posted a sharp fall in annual earnings, reflecting the impact of last year's cyberattack, but said profits had recovered in the second half.

Credit-checking firm Experian lost ground despite announcing a $1bn share buyback and hailing a record full year, having performed at the upper end of its expectations.

British Land was also in the red even as final results showed a record year of leasing for the real estate investment trust, helping underlying profits to rise 5% to £294m.

Market Movers

FTSE 100 (UKX) 10,290.99 -0.38% FTSE 250 (MCX) 22,525.38 -0.19% techMARK (TASX) 5,869.00 -0.44%

FTSE 100 - Risers

Severn Trent (SVT) 3,096.00p 4.65% Marks & Spencer Group (MKS) 334.70p 3.79% United Utilities Group (UU.) 1,354.00p 2.93% Fresnillo (FRES) 3,262.00p 1.57% Antofagasta (ANTO) 3,714.00p 1.56% Admiral Group (ADM) 3,426.00p 1.30% Airtel Africa (AAF) 335.00p 1.26% Babcock International Group (BAB) 996.60p 1.26% Scottish Mortgage Inv Trust (SMT) 1,453.50p 1.14% Land Securities Group (LAND) 594.00p 0.93%

FTSE 100 - Fallers

Tesco (TSCO) 446.70p -2.98% Relx plc (REL) 2,461.00p -2.53% Experian (EXPN) 2,608.00p -2.51% Autotrader Group (AUTO) 491.00p -2.13% Sainsbury (J) (SBRY) 305.30p -2.02% The Sage Group (SGE) 891.40p -1.89% Pearson (PSON) 1,120.00p -1.76% Flutter Entertainment (DI) (FLTR) 7,242.00p -1.56% Reckitt Benckiser Group (RKT) 4,692.00p -1.53% Entain (ENT) 526.20p -1.50%

FTSE 250 - Risers

RS Group (RS1) 652.00p 9.41% W.A.G Payment Solutions (EWG) 111.80p 4.68% Playtech (PTEC) 379.40p 4.57% AO World (AO.) 90.40p 3.20% Pennon Group (PNN) 514.00p 2.26% Hochschild Mining (HOC) 587.00p 2.25% Oxford Nanopore Technologies (ONT) 120.30p 1.95% Target Healthcare Reit Ltd (THRL) 107.00p 1.90% Applied Nutrition (APN) 216.25p 1.64% Ceres Power Holdings (CWR) 653.50p 1.46%

FTSE 250 - Fallers

SDCL Efficiency Income Trust (SEIT) 40.80p -5.99% Premier Foods (PFD) 197.80p -4.72% FirstGroup (FGP) 158.20p -4.53% C&C Group (CDI) (CCR) 111.00p -4.18% AEP Plantations (AEP) 2,090.00p -3.37% THG (THG) 31.80p -3.23% Aston Martin Lagonda Global Holdings (AML) 43.98p -2.93% ITV (ITV) 78.85p -2.58% SSP Group (SSPG) 158.40p -2.40% NCC Group (NCC) 137.60p -2.13%