London open: Stocks edge lower after inflation data, ahead of Fed

(Sharecast News) - London stocks edged lower in early trade on Wednesday as investors mulled the latest UK inflation reading and looked ahead to a policy announcement from the US Federal Reserve. At 0835 BST, the FTSE 100 was down 0.2% at 8,294.56.

Data released earlier by the Office for National Statistics showed that consumer price inflation was unchanged at 2.2% in the year to August, in line with expectations and above the BoE's 2% target.

Services inflation rose to 5.6% in August from 5.2% in July, also as expected.

Core CPI - which excludes energy, food, alcohol and tobacco - rose to 3.6% from 3.3% in July. This was a touch above expectations of 3.5%.

ONS chief economist Grant Fitzner said: "Inflation held steady in August as various price fluctuations offset each other.

"The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.

"This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year."

Ruth Gregory, deputy chief UK economist at Capital Economics, said: "Overall, a pause on interest rate cuts was already expected tomorrow and today's release cements that view.

"We continue to assume the next 25 basis point rate interest rate cut will take place in November and that rates will be cut at alternative BoE meetings until June."

Still to come, the Fed will make its latest policy announcement at 1900 BST.

Danske Bank said: "We expect a 25 basis point cut of the Fed Funds Rate target (to 5.00-5.25%). This morning markets price in a 65% probability for an even bigger 50bp rate cut.

"Even though the Fed will now initiate its rate cutting cycle, we do not expect changes to the pace of QT. We expect the updated rate projections to signal a total of 3x25bp rate cuts in 2024 (previously 1) followed by 6x25bp cuts in 2025 (previously 4)."

In equity markets, Legal & General fell after saying it had sold UK house builder CALA Group for £1.35bn to Ferguson Bidco, an entity owned by funds managed by Sixth Street Partners and Patron Capital.

The insurer said it would receive cash proceeds of £1.16bn, of which £500m will be paid at closing with the remaining consideration being paid over the next five years.

PZ Cussons tumbled as the Imperial Leather maker said it swung to a full-year pre-tax loss due to the devaluation of the Nigerian Naira.

On the upside, consumer goods giant Reckitt Benckiser rallied following a Bloomberg report that it has launched early discussions with potential suitors for a sale of its homecare assets, which could be worth more than £6bn.

Elsewhere, InterContinental Hotels was trading higher after an upgrade to 'buy' at Goldman Sachs, while Hammerson was boosted by an upgrade to 'buy' at Citi.

Kainos gained after an upgrade to 'buy' at Deutsche Bank.

Market Movers

FTSE 100 (UKX) 8,294.56 -0.18% FTSE 250 (MCX) 20,898.88 -0.22% techMARK (TASX) 4,839.34 -0.33%

FTSE 100 - Risers

Reckitt Benckiser Group (RKT) 4,705.00p 2.06% InterContinental Hotels Group (IHG) 7,958.00p 1.20% BAE Systems (BA.) 1,285.00p 0.94% Smith (DS) (SMDS) 482.20p 0.79% Haleon (HLN) 399.30p 0.58% BT Group (BT.A) 148.30p 0.41% Compass Group (CPG) 2,468.00p 0.37% Tesco (TSCO) 370.50p 0.35% Vodafone Group (VOD) 77.88p 0.33% Aviva (AV.) 496.00p 0.32%

FTSE 100 - Fallers

Burberry Group (BRBY) 595.20p -1.65% Rentokil Initial (RTO) 375.30p -1.63% Legal & General Group (LGEN) 225.00p -1.49% Halma (HLMA) 2,602.00p -1.44% Antofagasta (ANTO) 1,762.00p -1.18% Anglo American (AAL) 2,112.00p -1.17% Phoenix Group Holdings (PHNX) 548.50p -0.99% Berkeley Group Holdings (The) (BKG) 4,890.00p -0.95% IMI (IMI) 1,818.00p -0.93% Diageo (DGE) 2,503.50p -0.87%

FTSE 250 - Risers

Kainos Group (KNOS) 901.00p 2.39% North Atlantic Smaller Companies Inv Trust (NAS) 3,920.00p 2.08% Hilton Food Group (HFG) 907.00p 1.57% Lancashire Holdings Limited (LRE) 700.00p 1.45% AJ Bell (AJB) 450.00p 1.12% Ithaca Energy (ITH) 105.90p 1.05% Fidelity European Trust (FEV) 391.00p 0.90% Alpha Group International (ALPH) 2,260.00p 0.89% Vietnam Enterprise Investments (DI) (VEIL) 573.00p 0.88% Hammerson (HMSO) 30.04p 0.87%

FTSE 250 - Fallers

PZ Cussons (PZC) 88.00p -14.73% NCC Group (NCC) 168.20p -3.89% Spectris (SXS) 2,712.00p -3.35% Edinburgh Worldwide Inv Trust (EWI) 146.60p -2.14% SSP Group (SSPG) 162.00p -2.11% Clarkson (CKN) 3,645.00p -1.88% Watches of Switzerland Group (WOSG) 395.80p -1.74% Baltic Classifieds Group (BCG) 285.00p -1.72% Ocado Group (OCDO) 347.30p -1.59% Moonpig Group (MOON) 200.00p -1.23%