London close: Stocks slip as investors digest US inflation

(Sharecast News) - London's markets finished in the red on Tuesday, as investors digested a slight decrease in consumer inflation in the US, while the UK's unemployment figures remained stable.

The FTSE 100 closed 0.03% lower at 7,542.77 points, while the FTSE 250 saw a more significant decline, dropping 0.47% to 18,662.12 points.

On the currency front, sterling was last down 0.01% on the dollar at $1.2554, while it experienced a slightly larger dip against the euro, falling 0.22% to change hands at €1.1638.

"All eyes are on the next couple of days' central bank meetings at which rates are expected to remain on hold as central bankers access their economies for further clues as to which monetary policy to pursue," said IG senior market analyst Axel Rudolph.

"Slowing UK wage growth might help to move the Bank of England away from its still hawkish rhetoric but its voting members will keep a look out for Wednesday's industrial and manufacturing production numbers as well as UK GDP."

US inflation dips slightly, UK unemployment remains stable

In economic news, the cost of living in the US saw a slight dip in November, mainly due to a decline in energy prices.

The US Department of Labor reported a modest 0.1% month-on-month increase in the seasonally-adjusted consumer price index (CPI).

However, on an annual basis, the rate of change in CPI dropped by one-tenth of a percentage point to 3.1%.

While food prices increased 0.2% during the month, energy prices saw a 2.3% decrease.

The annual core CPI, excluding food and energy, remained steady at 4.0%, with a 0.3% monthly increase.

Notably, used car and truck prices rose by 1.6%, medical care commodities and services also increased moderately, and shelter prices increased by 0.4%.

"The slightly stronger 0.28% m/m rise in core consumer prices in November suggests the Fed may be able to hang onto its tightening bias for a little longer, but sharper declines in inflation are still likely to result in rates being cut aggressively next year," said Andrew Hunter, deputy chief US economist at Capital Economics.

On home shores, the unemployment rate in the UK held steady in the latest data, with official data indicating a rate of 4.2% for the three months ending in October.

Economic inactivity remained essentially unchanged at 20.9%.

Annual growth in total pay was 7.2%, or 7.3% when excluding bonuses - slightly lower than the prior month's 7.7% and below analysts' expectations of 7.5% in regular pay.

Adjusted for inflation, annual total pay increased 1.3%, while regular pay rose 1.4%.

Notably, vacancies declined by 45,000 in September, marking the 17th consecutive quarterly fall, and the total number of payrolled employees in November decreased by 13,000 compared to the previous month.

"The slowdown in wage growth is becoming more established every month, but the Monetary Policy Committee likely will wait for signs that this trend will be maintained through the early 2024 pay round before signalling it will reduce bank rate soon," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"Employee numbers edged down in October, and there are a few warning signs that they will continue to fall this winter, albeit gradually.

"The combination of flat-to-falling employment, alongside ongoing growth in the workforce, likely will mean that the unemployment rate continues to drift higher over the coming months."

In the UK housing market, new mortgage commitments took a substantial hit in the third quarter, as higher interest rates weighed on the industry.

According to the Bank of England's mortgage lenders and administrators statistics, new mortgage commitments, representing lending agreed to be advanced in the coming months, plummeted 16.5% in the third quarter to £51.5 billion, with a year-on-year decrease of 41.4%.

The outstanding value of residential mortgages also dipped by 0.1% from the previous quarter to £1.7trn, with a 0.8% decline compared to the same period last year.

Alarmingly, the proportion of total loan balances with arrears relative to outstanding mortgage balances increased to 1.14%, the highest level since the second quarter of 2017.

The value of outstanding mortgage balances with arrears rose 11.4% on the prior quarter to £18.8 billion, marking a 44% year-on-year increase.

Finally on data, despite Germany's struggling economy, investor sentiment in the country saw a slight improvement in fresh data.

The ZEW indicator of economic sentiment recorded a reading of 12.8, which was three points higher than November's figure and exceeded consensus expectations of 8.8.

The assessment of the current economic situation also showed a slight improvement, rising by 2.7 points, although it remained in negative territory at -77.1.

Royal Mail parent surges on upgrade, investment platforms sink

On London's equity markets, International Distributions Services surged 11.6%, driven by a Bank of America upgrade.

The Royal Mail parent company received an upgrade from 'neutral' to 'buy' as Bank of America noted the steady progress in the company's recovery.

It said the progress followed a recent union deal on pay and conditions with the Communication Workers Union, which allowed the firm to regain volume share.

Bank of America also anticipated meaningful benefits to the profit and loss account starting from the fourth quarter of 2024, along with reduced pressure on the cost base as inflation eases.

Additionally, the bank predicted a 6% rise in 2025 adjusted earnings before interest and tax.

Elsewhere, AstraZeneca gained 0.77% after announcing its agreement to acquire US vaccine maker Icosavax for up to $1.1bn.

Rio Tinto added 0.66%, and Antofagasta managed gains of 0.17%, rebounding after facing substantial losses in the prior session.

On the downside, Hargreaves Lansdown lost 6.64%, and AJ Bell was off 3.63% following concerns raised by the Financial Conduct Authority (FCA).

The FCA expressed apprehension regarding how investment platforms and self-invested personal pension (SIPP) operators managed interest earned on customers' cash balances.

Telecom utilities BT Group and Vodafone Group were down 3.74% and 2.22%, respectively, after Ofcom proposed prohibiting inflation-linked mid-contract price increases.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,542.77 -0.03% FTSE 250 (MCX) 18,662.12 -0.47% techMARK (TASX) 4,138.61 0.09%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 304.70p 2.63% Rightmove (RMV) 595.20p 2.34% International Consolidated Airlines Group SA (CDI) (IAG) 159.20p 2.05% Legal & General Group (LGEN) 244.70p 1.83% Pershing Square Holdings Ltd NPV (PSH) 3,318.00p 1.78% InterContinental Hotels Group (IHG) 7,028.00p 1.68% Convatec Group (CTEC) 231.60p 1.49% DCC (CDI) (DCC) 5,668.00p 1.43% Ocado Group (OCDO) 641.20p 1.39% Relx plc (REL) 3,159.00p 1.35%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 714.20p -6.66% Anglo American (AAL) 1,696.00p -5.20% BT Group (BT.A) 126.20p -3.92% Fresnillo (FRES) 560.80p -2.64% Smith (DS) (SMDS) 295.40p -2.51% Vodafone Group (VOD) 67.11p -2.10% Prudential (PRU) 881.20p -1.72% St James's Place (STJ) 681.00p -1.67% SEGRO (SGRO) 831.20p -1.40% Admiral Group (ADM) 2,760.00p -1.36%

FTSE 250 - Risers

International Distributions Services (IDS) 270.40p 11.64% Future (FUTR) 626.00p 5.39% Games Workshop Group (GAW) 9,475.00p 3.84% TUI AG Reg Shs (DI) (TUI) 627.50p 3.55% easyJet (EZJ) 490.50p 2.79% Spectris (SXS) 3,603.00p 2.53% Moonpig Group (MOON) 159.00p 2.25% Paragon Banking Group (PAG) 571.00p 2.06% Renishaw (RSW) 3,354.00p 2.01% HGCapital Trust (HGT) 407.00p 2.01%

FTSE 250 - Fallers

Digital 9 Infrastructure NPV (DGI9) 29.60p -8.07% Abrdn (ABDN) 171.70p -5.14% Coats Group (COA) 68.40p -4.74% Tritax Eurobox (GBP) (EBOX) 56.40p -4.41% Ceres Power Holdings (CWR) 166.80p -4.19% Helios Towers (HTWS) 68.80p -4.18% Ithaca Energy (ITH) 142.60p -3.91% Tyman (TYMN) 264.50p -3.64% Jupiter Fund Management (JUP) 81.35p -3.61% Watches of Switzerland Group (WOSG) 690.00p -3.50%