London open: Stocks edge lower after unexpected rise in inflation

(Sharecast News) - London stocks edged lower in early trade on Wednesday as an unexpected jump in consumer price inflation put pressure on the Bank of England to hike rates. At 0825 GMT, the FTSE 100 was down 0.4% at 7,507.95, while sterling was 0.5% firmer against the dollar at 1.2274 after data from the Office for National Statistics showed that CPI in the year to February ticked higher, driven by the soaring cost of food.

Inflation rose to 10.4% from 10.1% in January, coming in above expectations of 9.9%. On a monthly basis, CPI rose to 1.1% compared to 0.8% in February 2022.

The largest upward contributions came from restaurants and cafes, which the ONS said was driven by increases in the cost of alcohol, as well as food, and clothing. Food prices soared by 18.2% over the year.

Core inflation, which strips out the more volatile elements of food, energy, alcohol and tobacco, also rose sharply, to 6.2% from 5.8% in January.

ONS chief economist Grant Fitzner said: "Inflation ticked up in February mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.

"Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.

"These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for some seven months."

The inflation figures came just a day before the Bank of England's latest policy announcement.

Paul Dales, chief UK economist at Capital Economics, said the reacceleration in overall CPI inflation and core inflation "may be enough to tilt the Bank of England towards raising interest rates from 4.00% to 4.25% tomorrow despite the recent turmoil in the banking system".

Danni Hewson, head of financial analysis at AJ Bell, said: "After two weeks of instability on financial markets there had been growing expectation that the Bank of England may take a pause in its rate hike journey, and that can't be ruled out, but today's upward shift will be akin to popping a rooster into the henhouse."

Looking ahead to the rest of the day, investors were eyeing a policy announcement from the Federal Reserve, due at 1800 GMT.

In equity markets, housebuilder Vistry gained after it reported better-than-expected full-year profits and said market conditions were improving. The company posted a 21% rise in adjusted pre-tax profit to £418.4m for the year to December 31 against an average estimate of £411.1m.

Elsewhere, software, security and cloud services specialist Bytes Technology rallied after it said annual gross profit and adjusted operating earnings would be up 20%.

WPP was in focus after it announced the acquisition of influencer marketing agency Goat for an undisclosed sum.

In broker note action, Marks & Spencer was boosted by rating upgrades at Exane, Goldman Sachs and Citi.

However, British Land was knocked lower by a downgrade to 'sell' at Goldman.

Market Movers

FTSE 100 (UKX) 7,507.95 -0.38% FTSE 250 (MCX) 18,686.45 -0.49% techMARK (TASX) 4,508.75 -0.43%

FTSE 100 - Risers

Ocado Group (OCDO) 434.20p 1.73% Frasers Group (FRAS) 763.50p 0.79% RS Group (RS1) 915.50p 0.72% Halma (HLMA) 2,099.00p 0.62% B&M European Value Retail S.A. (DI) (BME) 475.50p 0.61% Ashtead Group (AHT) 5,146.00p 0.55% Haleon (HLN) 325.50p 0.54% Relx plc (REL) 2,580.00p 0.51% Persimmon (PSN) 1,238.00p 0.49% Reckitt Benckiser Group (RKT) 5,940.00p 0.37%

FTSE 100 - Fallers

British Land Company (BLND) 377.80p -5.29% Land Securities Group (LAND) 599.20p -2.31% Barclays (BARC) 140.88p -1.58% Smurfit Kappa Group (CDI) (SKG) 2,931.00p -1.51% Smith (DS) (SMDS) 309.10p -1.34% M&G (MNG) 183.30p -1.24% Unite Group (UTG) 904.00p -1.20% Rio Tinto (RIO) 5,277.00p -1.18% Endeavour Mining (EDV) 1,740.00p -1.14% Severn Trent (SVT) 2,777.00p -1.10%

FTSE 250 - Risers

Marks & Spencer Group (MKS) 154.55p 4.39% Bytes Technology Group (BYIT) 389.00p 3.57% Balfour Beatty (BBY) 368.00p 3.20% Premier Foods (PFD) 124.00p 2.82% Mitie Group (MTO) 84.20p 2.81% Vistry Group (VTY) 746.00p 1.91% Genus (GNS) 2,962.00p 1.44% Sirius Real Estate Ltd. (SRE) 73.30p 1.38% JPMorgan Japanese Inv Trust (JFJ) 465.00p 1.20% Spire Healthcare Group (SPI) 211.00p 0.96%

FTSE 250 - Fallers

Senior (SNR) 143.80p -4.89% PureTech Health (PRTC) 193.80p -4.77% Ninety One (N91) 177.90p -3.16% Auction Technology Group (ATG) 620.00p -2.82% Workspace Group (WKP) 456.20p -2.48% Spirent Communications (SPT) 173.10p -2.20% TI Fluid Systems (TIFS) 96.80p -2.12% Synthomer (SYNT) 123.50p -2.06% Murray Income Trust (MUT) 828.00p -2.01% Essentra (ESNT) 172.40p -1.93%