London open: Stocks edge down after UK inflation, ahead of US rate decision

(Sharecast News) - London stocks edged down in early trade on Wednesday as investors mulled data showing that inflation cooled a little in November, and looked to the latest rate decision from the US Federal Reserve. At 0820 GMT, the FTSE 100 was 0.2% lower at 7,486.87, while sterling was flat against the dollar at 1.2365.

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 even as it reported a return to annual profits and said it expected underlying earnings to increase significantly in 2023, despite market uncertainty.

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

Housebuilders Taylor Wimpey and Redrow were both knocked lower by rating downgrades at JPMorgan Cazenove.

On the upside, 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) 7,486.87 -0.21% FTSE 250 (MCX) 19,007.30 -0.41% techMARK (TASX) 4,418.10 -0.22%

FTSE 100 - Risers

BAE Systems (BA.) 831.00p 1.22% BT Group (BT.A) 115.00p 0.97% Harbour Energy (HBR) 314.10p 0.93% Antofagasta (ANTO) 1,491.00p 0.54% Centrica (CNA) 90.94p 0.46% Intermediate Capital Group (ICP) 1,240.00p 0.40% BP (BP.) 472.90p 0.39% Rolls-Royce Holdings (RR.) 90.93p 0.35% Compass Group (CPG) 1,905.00p 0.32% SSE (SSE) 1,713.50p 0.29%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 102.00p -2.11% Frasers Group (FRAS) 745.00p -1.84% Ashtead Group (AHT) 4,976.00p -1.58% Barratt Developments (BDEV) 402.90p -1.49% Auto Trader Group (AUTO) 561.20p -1.44% Halma (HLMA) 2,155.00p -1.42% Ocado Group (OCDO) 691.20p -1.26% InterContinental Hotels Group (IHG) 4,932.00p -1.08% London Stock Exchange Group (LSEG) 7,530.00p -1.03% Flutter Entertainment (CDI) (FLTR) 11,975.00p -0.95%

FTSE 250 - Risers

Volution Group (FAN) 358.00p 2.14% Ferrexpo (FXPO) 157.10p 1.95% Morgan Advanced Materials (MGAM) 309.00p 1.64% Drax Group (DRX) 623.50p 1.46% JPMorgan Emerging Markets Inv Trust (JMG) 108.60p 1.12% Impax Environmental Markets (IEM) 425.50p 1.07% UK Commercial Property Reit Limited (UKCM) 59.30p 1.02% Trainline (TRN) 307.60p 0.65% Polar Capital Technology Trust (PCT) 1,884.00p 0.53% City of London Inv Trust (CTY) 408.00p 0.49%

FTSE 250 - Fallers

TUI AG Reg Shs (DI) (TUI) 139.30p -5.66% Watches of Switzerland Group (WOSG) 908.00p -5.32% Redrow (RDW) 454.60p -3.77% Wizz Air Holdings (WIZZ) 2,324.00p -3.57% Elementis (ELM) 113.90p -2.82% Aston Martin Lagonda Global Holdings (AML) 158.45p -2.40% Vistry Group (VTY) 607.00p -2.33% Wetherspoon (J.D.) (JDW) 427.60p -2.15% Crest Nicholson Holdings (CRST) 224.20p -2.10% Warehouse Reit (WHR) 108.80p -1.81%