London open: FTSE gains after inflation data; all eyes on Spring Statement

(Sharecast News) - London stocks rose in early trade on Wednesday as investors mulled a slightly bigger-than-expected drop in UK inflation and looked ahead to the Spring Statement. At 0825 GMT, the FTSE 100 was up 0.3% at 8,686.38, while sterling was down 0.3% against the dollar at 1.2902.

Figures released earlier by the Office for National Statistics showed that inflation eased a little more than expected in February as clothing prices fell.

Consumer price inflation eased to 2.8% from 3% in January. Economists were expecting a smaller decline to 2.9%.

ONS chief economist Grant Fitzner said: "Clothing prices, particularly for women's clothing, was the biggest driver of this month's fall.

"This was only partially offset by small increases, for example, from alcoholic drinks."

Core CPI - which excludes energy, food, alcohol and tobacco - rose 3.5% in February, down from 3.7% the month before.

The data also showed that services inflation was unchanged at 5%, versus expectations for a fall to 4.9%.

Paul Dales, chief UK economist at Capital Economics, said the dip in CPI inflation "is a bit of a red herring" as inflation will probably be back above 3.0% in April once energy and water bills increase and around 3.5% by September.

"That and the risk of spillovers into wages will probably mean the Bank of England will press pause on interest rate cuts at some point in the coming months," he said.

"If that were to prompt a further rise in market rate expectations, today may not be the only time this year the Chancellor has to tighten fiscal policy to compensate for higher borrowing costs."

Looking ahead to the rest of the day, all eyes will be on Chancellor Rachel Reeves' Spring Statement.

Kathleen Brooks, research director at XTB, said: "The Chancellor has said that this is not a fiscal event, however, she is expected to announce a swathe of spending cuts that have been well signalled in recent days.

"Big cuts are expected across government budgets, the civil service is expected to see a large reduction in costs and in personnel, and £5bn is expected to be shaved off of the disability benefits bill. Reports suggest that there could be further cuts to benefits announced today, with some universal credit benefits frozen until 2030 in an effort to cut government spending.

"The focus on spending cuts is designed to help Reeves rebuild her fiscal headroom, which has been eroded by a sharp reduction in the Office for Budget Responsibility's forecast for UK growth.

"There are very few spending increases that are expected to be announced today, bar some small spending pledges for homes and technical colleges. If October was the Budget of tax rises, then this is the Budget of spending cuts. The balance between taxes and spending plans have, so far, been absorbed by financial markets well. But will it stay this way?"

In equity markets, defence firm Babcock was the top gainer on the FTSE 100 after saying it has been awarded a five-year contract extension with the Ministry of Defence worth around £1bn.

Ocado surged after an upgrade to 'overweight' from 'neutral' by JPMorgan, which identified "several reasons to be more optimistic".

Bakkavor rallied following a report that convenience food maker Greencore has lifted its bid for the rival. Bakkavor was considering the enhanced proposal, newswire Bloomberg reported, citing unnamed sources.

Two takeover bids from Greencore were rejected by Bakkavor this month, with the latest cash-and-stock offer valued at 189p a share valuing the target at £1.14bn.

Housebuilder Vistry tumbled as it reported a slump in profits after a "disappointing" year amid challenging market conditions and cost forecasting issues in its South Division in the last quarter of the year.

Market Movers

FTSE 100 (UKX) 8,686.38 0.26% FTSE 250 (MCX) 20,067.67 0.43% techMARK (TASX) 4,679.75 -0.03%

FTSE 100 - Risers

Babcock International Group (BAB) 742.50p 1.37% Rolls-Royce Holdings (RR.) 812.20p 1.30% Glencore (GLEN) 308.25p 1.23% Anglo American (AAL) 2,418.50p 1.04% Shell (SHEL) 2,792.50p 0.99% Kingfisher (KGF) 242.60p 0.96% Marks & Spencer Group (MKS) 335.60p 0.93% CRH (CDI) (CRH) 7,612.00p 0.87% Fresnillo (FRES) 948.50p 0.85% BP (BP.) 445.50p 0.81%

FTSE 100 - Fallers

Auto Trader Group (AUTO) 749.20p -0.95% Convatec Group (CTEC) 258.40p -0.69% GSK (GSK) 1,476.50p -0.64% Experian (EXPN) 3,600.00p -0.63% Haleon (HLN) 379.80p -0.63% Croda International (CRDA) 2,874.00p -0.62% Entain (ENT) 651.40p -0.46% Land Securities Group (LAND) 546.00p -0.46% Unite Group (UTG) 806.50p -0.31% Hikma Pharmaceuticals (HIK) 2,000.00p -0.30%

FTSE 250 - Risers

Bakkavor Group (BAKK) 180.00p 6.82% AO World (AO.) 103.80p 6.13% Ithaca Energy (ITH) 149.60p 5.20% Oxford Instruments (OXIG) 1,976.00p 4.66% Ferrexpo (FXPO) 64.60p 4.53% Genuit Group (GEN) 382.00p 2.55% Edinburgh Worldwide Inv Trust (EWI) 169.20p 2.55% Apax Global Alpha Limited (APAX) 122.60p 2.51% PPHE Hotel Group Ltd (PPH) 1,240.00p 2.48% Aston Martin Lagonda Global Holdings (AML) 74.65p 2.47%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 553.50p -2.89% Diversified Energy Company (DEC) 1,006.00p -1.47% Dr. Martens (DOCS) 53.00p -1.40% Bytes Technology Group (BYIT) 486.60p -1.38% Zigup (ZIG) 303.50p -1.14% Genus (GNS) 1,924.00p -1.03% Burberry Group (BRBY) 805.80p -0.89% Currys (CURY) 90.25p -0.61% Primary Health Properties (PHP) 94.65p -0.58% Tate & Lyle (TATE) 520.00p -0.57%