London close: Stocks fall as US inflation comes in hot

(Sharecast News) - London's stock markets closed in the red on Thursday, reversing earlier gains after US consumer inflation came in hotter than expected. Marks and Spencer was also in focus, facing pressure after a trading update.

The FTSE 100 closed down 0.98%, settling at 7,576.59 points, while the FTSE 250 experienced a decline of 0.89% to settle at 19,107.93.

In currency markets, sterling was last down 0.17% on the dollar, trading at $1.2720, while it strengthened 0.02% against the euro to change hands at €1.1614.

"It was going to take a big fall in inflation to drive stocks higher after the huge gains of the fourth quarter of 2023," said IG chief market analyst Chris Beauchamp.

"Unsurprisingly, the number was slightly ahead of forecasts, and with investors already doubting their previous optimism around March rate cuts, it was almost inevitable that further selling would set in.

"It seems like this January will continue to be a month of profit taking, but the medium-term outlook continues to suggest that inflation will keep falling, keeping rate cut hopes alive."

Beauchamp added that oil prices were giving the impression that they were bottoming out for the time being.

"Today's 3% leap comes after a volatile week of dramatic movements, but having shrugged off the Saudi price cut earlier in the week it looks like we have the makings of a decent short-term rally at least."

US inflation comes in hotter than expected in December

In economic news, consumer price inflation in the US experienced a more significant increase than anticipated in December.

The data showed that consumer prices surged 3.4%, marking an increase from the previous month's 3.1% and surpassing economists' projections of a 3.2% rise.

The primary driver behind the uptick was a notable escalation in housing costs.

Meanwhile, core inflation, which excludes the volatile food and energy components, showed a slight slowdown, falling to 3.9% from 4%, with economists initially expecting a growth rate of 3.8%.

Elsewhere, the US Labor Department reported that in the week ended 6 January, Americans filed claims for state benefits at a reduced pace, reaching their lowest level since October.

Initial jobless claims decreased by 1,000 compared to the prior week's revised figure, totalling 202,000, below the consensus estimate of 210,000.

Additionally, continuing claims declined by 34,000 to reach 1.83 million, also below market expectations of 1.87 million.

The four-week moving average, designed to minimise week-to-week fluctuations, showed a modest decrease of 250, settling at 207,750.

At the same time, the advance seasonally-adjusted insured unemployment rate for the week ended 30 December was 1.2%, reflecting a week-on-week decline of 0.1 percentage points.

Commenting on the jobless figures, Neil Wilson, chief market analyst at Finalto, quipped that the labour market wasn't anywhere near "shaking under the stress" of high interest rates.

"In short - you ain't getting a March rate cut; it is the kind of print that shouts the Fed does not need to rush to cut this quarter.

"Disinflation won't be linear, and we think the Fed is going to be rather - perhaps overly - cautious in easing in this kind of environment.

"It's going to take way, way longer to get to target - if indeed at all - and the market is the wrong side of this reality."

M&S and Tesco fall, Trustpilot surges on guidance hike

On London's equity markets, Marks and Spencer Group declined 5.19% after the company announced it was on track to meet annual expectations, reporting an 8.1% increase in Christmas quarter sales but expressing concerns over rising costs.

Tesco experienced a slight setback of 1.35% after initially showing gains.

The supermarket giant raised its profit guidance for the full year and presented impressive third-quarter results, with notable sales growth during the crucial Christmas trading period.

Advertising conglomerate WPP slumped 3.85% after a double downgrade to 'sell' at UBS, accompanied by a significant reduction in its price target.

Informa faced a 2.29% decrease in its stock value despite celebrating a robust performance in 2023 and optimistic expectations for further growth this year.

Housebuilder Taylor Wimpey edged down 3.07% after it indicated that full-year profits would likely be at the upper end of its guidance, but also expressed caution about the ongoing uncertainty in the market, despite recent reductions in mortgage rates.

On the upside, Antofagasta managed to cling to gains of 0.32% after an upgrade to 'outperform' from 'sector perform' at RBC Capital Markets, which also raised its price target on the stock.

Premier Inn owner Whitbread advanced 2.34% as it maintained its full-year guidance.

The company reported a strong rise in accommodation sales during the third quarter, with momentum continuing into the final three months of the financial year.

Trustpilot Group leapt 11.88% after it announced a share buyback program of up to £20m and projected that its 2023 adjusted underlying earnings would surpass market expectations.

Cybersecurity firm Darktrace jumped 8.88% after an increase in its sales and margin guidance for the full year.

The company revised its sales forecast to a range between 23.0% and 24.5%, up from previous guidance.

Hilton Food Group climbed 1.98% after it said full-year earnings were set to be in line with internal projections, with strong trading during the festive period, including a 3% volume growth in December compared to the prior year.

Low-cost carrier easyJet ascended 1.81% after receiving a double upgrade to 'buy' at Bank of America Merrill Lynch, reflecting positive sentiment in the airline's outlook.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,576.59 -0.98% FTSE 250 (MCX) 19,107.93 -0.89% techMARK (TASX) 4,256.96 -0.75%

FTSE 100 - Risers

Whitbread (WTB) 3,632.00p 2.31% Rentokil Initial (RTO) 420.00p 1.47% Diageo (DGE) 2,815.50p 1.00% Anglo American (AAL) 1,839.80p 0.91% BAE Systems (BA.) 1,163.50p 0.69% Hikma Pharmaceuticals (HIK) 1,903.00p 0.66% Coca-Cola HBC AG (CDI) (CCH) 2,332.00p 0.60% Pershing Square Holdings Ltd NPV (PSH) 3,570.00p 0.56% London Stock Exchange Group (LSEG) 9,140.00p 0.53% Antofagasta (ANTO) 1,588.00p 0.32%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 263.30p -5.19% Barclays (BARC) 145.58p -4.63% WPP (WPP) 729.00p -4.00% Rolls-Royce Holdings (RR.) 297.00p -3.95% Lloyds Banking Group (LLOY) 45.24p -3.73% Ocado Group (OCDO) 661.40p -3.56% Associated British Foods (ABF) 2,254.00p -3.51% Taylor Wimpey (TW.) 143.55p -3.27% Barratt Developments (BDEV) 535.60p -3.22% SSE (SSE) 1,805.00p -3.11%

FTSE 250 - Risers

Trustpilot Group (TRST) 163.50p 12.29% Darktrace (DARK) 365.90p 9.03% Tullow Oil (TLW) 32.20p 2.42% Hilton Food Group (HFG) 772.00p 2.12% Helios Towers (HTWS) 89.40p 1.59% FDM Group (Holdings) (FDM) 436.00p 1.40% Johnson Matthey (JMAT) 1,636.00p 1.33% Ithaca Energy (ITH) 143.00p 1.27% Assura (AGR) 46.68p 1.21% LondonMetric Property (LMP) 186.30p 1.20%

FTSE 250 - Fallers

Close Brothers Group (CBG) 687.50p -10.89% Ferrexpo (FXPO) 73.55p -9.75% PureTech Health (PRTC) 186.00p -6.53% IWG (IWG) 175.00p -4.99% Aston Martin Lagonda Global Holdings (AML) 202.40p -4.80% Foresight Group Holdings Limited NPV (FSG) 387.00p -4.44% International Distributions Services (IDS) 250.80p -4.31% ITV (ITV) 59.92p -4.04% Bellway (BWY) 2,614.00p -3.90% WH Smith (SMWH) 1,252.00p -3.69%