London open: Stocks fall as inflation data dashes rate cut hopes

(Sharecast News) - London stocks fell in early trade on Wednesday as data showed that inflation fell less than expected in April, dashing hopes of a summer rate cut. At 0820 BST, the FTSE 100 was down 0.6% at 8,369.40.

Figures released earlier by the Office for National Statistics showed that consumer price inflation fell in April to its lowest level in more than three years as energy costs declined.

Consumer price inflation dropped to 2.3% from 3.2% the month before, hitting its lowest level since July 2021 and edging closer to the Bank of England's 2% target. However, it was above the 2.1% expected.

The easing reflected large downward effects from gas and electricity after Ofgem lowered the energy price cap in April. Ofgem estimated that for an average household paying by direct debit for dual fuel, this equated to £1,690, a fall of £238 over the course of a year.

The data showed that food prices slowed to the lowest annual rate since November 2021. Prices of food and non-alcoholic beverages rose by 2.9% in the year to April, down from 4% in March. The rate has eased for the 13th consecutive month from a recent peak of 19.2% in March 2023, the highest annual rate seen for over 45 years.

However, services inflation printed at 5.9%, down from 6% in March but higher than the 5.4% expected and above the Bank of England's forecast of 5.5%.

Core inflation - which excludes energy and food prices - fell to 3.9% from 4.2%, but was above the 3.6% forecast.

ONS chief economist Grant Fitzner said: "There was another large fall in annual inflation led by lower electricity and gas prices, due to the reduction in the Ofgem energy price cap.

"Tobacco prices also helped pull down the rate, with no duty changes announced in the Budget.

"Meanwhile food price inflation saw further falls over the year.

"These falls were partially offset by a small uptick in petrol prices."

Paul Dales, chief UK economist at Capital Economics, said the smaller-than-expected fall in CPI inflation makes a June rate cut unlikely and casts some doubt over August too.

"To some extent, it also makes our forecast that rates will fall from 5.25% now to 3.00% next year look more challenging," he added.

Separate figures from the ONS showed the government borrowed £20.5bn in April - the fourth highest borrowing figure for that month since records began in 1993.

Borrowing in April was up £1.5bn on the same month a year earlier and £1.2bn above the Office for Budget Responsibility's £19.3bn forecast.

In equity markets, housebuilders were among the worst performers as rate cut expectations were pushed back, with Persimmon, Taylor Wimpey, Barratt, Redrow, Crest Nicholson and Bellway all weaker.

SSE lost ground as it posted a decline in full-year operating profit.

RS Group tumbled as it said annual profits dropped by a quarter. The industrial and electrical products provider - formerly Electrocomponents - pinned the blame on weakness in global industrial production and the unwinding of unusual post-pandemic trading tailwinds.

Adjusted operating profit slumped by 25% on a like-for-like basis to £312m in the 12 months to 31 March, as LFL revenues fell 8% to £2.94bn and the adjusted operating profit margin fell to 10.6% from 13.5%.

On the upside, Marks & Spencer surged as it reinstated its dividend and posted a jump in full-year sales and profits as the retailer's turnaround efforts bore fruit.

Pub group Mitchells & Butlers also rallied after saying that full-year results were set to be at the top end of consensus expectations as it reported a rise in first-half profit.

Market Movers

FTSE 100 (UKX) 8,369.40 -0.56% FTSE 250 (MCX) 20,697.54 -0.41% techMARK (TASX) 4,838.53 -0.40%

FTSE 100 - Risers

B&M European Value Retail S.A. (DI) (BME) 545.60p 0.81% Intermediate Capital Group (ICG) 2,312.00p 0.61% Sainsbury (J) (SBRY) 284.80p 0.49% Tesco (TSCO) 313.20p 0.42% F&C Investment Trust (FCIT) 1,036.00p 0.39% London Stock Exchange Group (LSEG) 9,368.00p 0.24% International Consolidated Airlines Group SA (CDI) (IAG) 173.95p 0.23% Imperial Brands (IMB) 1,948.00p 0.18% HSBC Holdings (HSBA) 698.80p 0.16% Airtel Africa (AAF) 119.70p 0.08%

FTSE 100 - Fallers

SSE (SSE) 1,757.00p -2.33% Persimmon (PSN) 1,424.50p -2.10% Taylor Wimpey (TW.) 144.25p -1.84% Ashtead Group (AHT) 5,686.00p -1.83% BP (BP.) 482.25p -1.74% Antofagasta (ANTO) 2,369.00p -1.70% Anglo American (AAL) 2,645.00p -1.56% Barratt Developments (BDEV) 502.80p -1.49% Unite Group (UTG) 932.50p -1.43% SEGRO (SGRO) 904.40p -1.31%

FTSE 250 - Risers

Mitchells & Butlers (MAB) 275.00p 3.38% Mony Group (MONY) 241.60p 2.20% Playtech (PTEC) 499.50p 2.15% Domino's Pizza Group (DOM) 347.40p 1.94% Spire Healthcare Group (SPI) 263.50p 1.93% VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 489.00p 1.77% Herald Investment Trust (HRI) 2,225.00p 1.60% Foresight Group Holdings Limited NPV (FSG) 450.00p 1.58% Baltic Classifieds Group (BCG) 242.00p 1.47% Currys (CURY) 72.00p 1.34%

FTSE 250 - Fallers

Redrow (RDW) 695.00p -4.14% Assura (AGR) 40.90p -3.22% Kainos Group (KNOS) 1,234.00p -2.83% Crest Nicholson Holdings (CRST) 221.60p -2.12% Future (FUTR) 976.00p -1.91% Hammerson (HMSO) 28.24p -1.88% Hilton Food Group (HFG) 910.00p -1.83% AO World (AO.) 107.80p -1.82% Bellway (BWY) 2,698.00p -1.82% Primary Health Properties (PHP) 93.10p -1.74%