London midday: Stocks steady as investors mull inflation reading

(Sharecast News) - London stocks were flat by midday on Wednesday as UK inflation fell a touch less than expected and services inflation remained sticky, dampening hopes of a rate cut in August. The FTSE 100 was steady at 8,166.57, paring earlier small losses. Meanwhile, sterling rose above $1.30 for the first time in a year.

Data released earlier by the Office for National Statistics showed that UK inflation was unchanged in June, with the consumer price index up 2% in the year to June.

This was in line with the Bank of England's target but a touch higher than expectations for a fall to 1.9%.

The ONS said that restaurant and hotel prices, which rose "strongly", were the largest upward contributor. Second-hand car costs fell, but by less than this time last year.

However, that was offset by widespread sales pushing down clothing and footwear prices.

Core CPI, which excludes the more volatile elements of energy, food, alcohol and tobacco, rose by 3.5% in the 12 months to June, also unchanged on May.

The consumer prices index including occupiers' housing costs (CPIPH) also held steady compared to May, rising by 2.8%. Core CPIH was 4.2%.

The Bank of England is widely expected to cut rates, which currently stand at a 16-year high of 5.25%, later this summer.

However, while CPI remains at 2%, the BoE's long-term inflation target, the Monetary Policy Committee has flagged concerns about the level of core CPI.

Services sector CPI also remains high, unchanged at 5.7% in June, although further falls in food prices helped offset that partially.

Paul Dales, chief UK economist at Capital Economics, said: "By staying at 5.7% in June, services inflation remained well above the 5.1% rate in June that the BoE forecast back in May.

"Admittedly, a lot of that overshoot happened in April and May. And that didn't stop the BoE from sounding a bit dovish at the subsequent June policy meeting. Even so, the BoE expected services inflation to fall 0.2ppts in June, which didn't happen.

"And only some of the stickiness of services inflation in June may be due to the influence of Taylor Swift's concerts. They may have been behind some of the large rise in hotels inflation from 7.0% to 9.8%. But cultural services inflation, which would capture any influence from the ticket prices, dipped from 7.4% to 7.3%. As a result, it's not obvious that the BoE can ignore a chunk of the stickiness of services inflation.

"Tomorrow's release of the wage growth figures for May will shed a bit more light. But at the moment, we're becoming even less confident in our existing forecast that the BoE will cut interest rates from 5.25% to 5.00% at the next policy meeting in August."

In equity markets, HSBC was in focus as it promoted finance chief George Elhedery to the role of chief executive with effect from September, replacing outgoing boss Noel Quinn.

Antofagasta slumped as it warned that full-year production would be at the lower end of its guidance of 670-710,000 tonnes.

Legal & General was hit by a downgrade to 'sector perform' from 'outperform' at RBC Capital Markets.

Animal genetics firm Genus was under the cosh after it said profits this year would be lower than expected due to ongoing market challenges in China and Brazil.

Defence and aerospace group Babcock fell even as it reported a 34% surge in underlying profits in the year ended 31 March despite a £90m hit on a ship-building contract with the Royal Navy.

Market Movers

FTSE 100 (UKX) 8,166.57 0.02% FTSE 250 (MCX) 21,124.52 -0.42% techMARK (TASX) 4,793.54 -0.75%

FTSE 100 - Risers

Barclays (BARC) 231.90p 2.00% BT Group (BT.A) 139.85p 1.60% Fresnillo (FRES) 634.50p 1.52% Severn Trent (SVT) 2,509.00p 1.46% Smurfit Westrock (DI) (SWR) 3,764.00p 1.32% Ashtead Group (AHT) 5,508.00p 1.29% Coca-Cola HBC AG (CDI) (CCH) 2,722.00p 1.19% Standard Chartered (STAN) 734.00p 1.07% National Grid (NG.) 933.20p 0.95% NATWEST GROUP (NWG) 329.60p 0.89%

FTSE 100 - Fallers

Antofagasta (ANTO) 2,047.00p -3.81% Intermediate Capital Group (ICG) 2,166.00p -1.99% Sage Group (SGE) 1,040.50p -1.75% Legal & General Group (LGEN) 226.60p -1.65% Melrose Industries (MRO) 577.60p -1.50% Scottish Mortgage Inv Trust (SMT) 880.40p -1.43% JD Sports Fashion (JD.) 117.00p -1.43% Flutter Entertainment (DI) (FLTR) 15,725.00p -1.41% Frasers Group (FRAS) 833.00p -1.30% Intertek Group (ITRK) 4,702.00p -1.30%

FTSE 250 - Risers

Hochschild Mining (HOC) 193.40p 2.44% Ithaca Energy (ITH) 127.80p 2.40% Pennon Group (PNN) 633.50p 2.10% Close Brothers Group (CBG) 527.50p 2.03% Endeavour Mining (EDV) 1,856.00p 1.70% Abrdn (ABDN) 165.40p 1.63% Harbour Energy (HBR) 308.60p 1.48% PPHE Hotel Group Ltd (PPH) 1,420.00p 1.43% Direct Line Insurance Group (DLG) 191.30p 1.32% Diversified Energy Company (DEC) 1,264.00p 1.28%

FTSE 250 - Fallers

Genus (GNS) 1,800.00p -5.46% Polar Capital Technology Trust (PCT) 3,290.00p -3.24% Plus500 Ltd (DI) (PLUS) 2,202.00p -3.00% Allianz Technology Trust (ATT) 392.00p -2.61% Genuit Group (GEN) 483.50p -2.32% Balanced Commercial Property Trust Limited (BCPT) 82.00p -2.15% Ibstock (IBST) 192.00p -2.14% Bridgepoint Group (Reg S) (BPT) 250.00p -2.11% Indivior (INDV) 766.50p -2.11% Asia Dragon Trust (DGN) 415.00p -1.66%