London pre-open: Stocks to dip ahead of Spring Statement; inflation in focus

(Sharecast News) - London stocks were set to dip at the open on Wednesday as investors mulled a bigger-than-expected drop in UK inflation and looked ahead to the Spring Statement. The FTSE 100 was called to open around five points lower.

Figures released earlier by the Office for National Statistics showed that consumer price inflation eased to 2.8% in February from 3% in January. Economists were expecting inflation to ease 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."

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 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 signaled 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 corporate news, housebuilder Vistry 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.

Pre-tax profit for 2024 fell 64% to £105.5m despite a 7% rise in completions. Vistry added that its forward order book totalled £4.4bn in the year to date, compared with £4.6bn last year, while the group sales rate was down to 0.59 per site per week from 0.81, reflecting a low volume of Partner Funded transactions in the first quarter.

Ithaca Energy reported production and financial performance at the top end of guidance in its full-year results, declaring total dividends of $500m.

The FTSE 250 company said the year was marked by the transformational acquisition of Eni's UK upstream assets in October, making Ithaca the largest resource holder and second-largest independent producer in the UK Continental Shelf.

It also completed a $2.25bn refinancing as it maintained robust operational momentum into early 2025, while the board reaffirmed its $500m dividend target for the current year.