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London open: Stocks slump as UK inflation ticks higher

(Sharecast News) - London stocks fell sharply in early trade on Wednesday as a surprise jump in UK inflation dampened rate cut hopes. At 0840 GMT, the FTSE 100 was down 1.3% at 7,459.92.

Data released earlier by the Office for National Statistics showed that the consumer price index rose to 4% in the year to December from 3.9% in November, versus expectations for a drop to 3.8%. This marked the first jump in inflation since February 2023 and was driven by a rise in alcohol and tobacco prices.

Alcohol and tobacco inflation rose to 12.9% from 10.2%.

ONS chief economist Grant Fitzner said: "The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently introduced duty increases.

"These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.

"Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remains lower than a year ago."

Core inflation - which excludes food and energy - was unchanged at 5.1%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Frustration is in the air as UK inflation continues to prove stubborn. The slight rise in the headline rate to 4% is the last move companies and households wanted to see, as it pushes the prospect of interest rate cuts further down the line. There had been high hopes that with fuel costs falling and food price rises slowing, the headline rate of inflation would keep easing.

"With inflation still double the Bank of England's target, policymakers are still likely to stay ultra cautious about the prospects for interest rate cuts this year. Worries are still swirling about the effect on prices of delays to goods arriving from Asia, given that attacks in the Red Sea are disrupting around 20% of global shipping. The tight labour market here in the UK will also be a cause for concern, despite signs that wage growth is easing.

"Downwards pressure on inflation is still expected, with the World Bank forecasting global growth to slow, and the UK economy at the edge of recession, this should act as a further drag on demand. But the Bank of England is not expecting inflation to reach 2% until the end of 2025. So, although cuts are being eyed in 2024, more patience will be needed."

In equity markets, miners were under the cosh after China posted reported GDP growth, with Glencore, Antofagasta and Anglo American all down. Antofagasta was also in focus after a production report.

Housebuilders lost ground as the inflation data dashed early rate cut hopes, with Persimmon, Barratt Developments and Vistry all in the red.

Ibstock fell as the building products supplier said full-year revenues are expected to have fallen by 21% to around £405m.

888 tumbled as the William Hill owner warned that adjusted earnings before interest, taxes, depreciation and amortisation for 2024 were set to be at the low end of the consensus range due to extra investment.

Education publisher Pearson fell despite hailing a a strong 2023 financial performance, with a 5% increase in underlying group sales and a jump in adjusted operating profit.

On the upside, IMI was boosted by an upgrade to 'buy' from 'neutral' at Goldman Sachs.

Keller gained as it said 2023 underlying operating profit was expected to be "significantly ahead" of market expectations after a particularly strong end to the year.

BP was in the spotlight as it named its former chief financial officer Murray Auchincloss as its permanent chief executive, after having served in an interim capacity for the past four months.

Market Movers

FTSE 100 (UKX) 7,459.92 -1.30% FTSE 250 (MCX) 18,958.00 -1.23% techMARK (TASX) 4,271.79 -0.71%

FTSE 100 - Risers

IMI (IMI) 1,600.00p 3.16% International Consolidated Airlines Group SA (CDI) (IAG) 142.55p 0.32% Rolls-Royce Holdings (RR.) 298.80p 0.20% Smith & Nephew (SN.) 1,066.50p 0.14% Hikma Pharmaceuticals (HIK) 1,972.00p 0.10% Vodafone Group (VOD) 67.39p -0.01% JD Sports Fashion (JD.) 107.10p -0.23% Experian (EXPN) 3,191.00p -0.28% Convatec Group (CTEC) 242.40p -0.33% BAE Systems (BA.) 1,177.00p -0.34%

FTSE 100 - Fallers

Ocado Group (OCDO) 597.60p -3.30% Glencore (GLEN) 425.50p -3.11% Persimmon (PSN) 1,424.50p -3.00% Admiral Group (ADM) 2,547.00p -2.79% Prudential (PRU) 783.80p -2.66% SEGRO (SGRO) 832.00p -2.60% M&G (MNG) 215.00p -2.58% Intermediate Capital Group (ICP) 1,548.00p -2.46% Rentokil Initial (RTO) 401.90p -2.45% Antofagasta (ANTO) 1,582.50p -2.44%

FTSE 250 - Risers

Keller Group (KLR) 851.00p 2.53% Tullow Oil (TLW) 33.28p 2.09% BH Macro Ltd. GBP Shares (BHMG) 361.00p 0.84% Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 267.00p 0.75% Indivior (INDV) 1,239.00p 0.65% IntegraFin Holding (IHP) 290.40p 0.41% Vietnam Enterprise Investments (DI) (VEIL) 564.00p 0.36% Bankers Inv Trust (BNKR) 103.20p 0.00% Clarkson (CKN) 3,485.00p 0.00% Moonpig Group (MOON) 161.10p 0.00%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 187.10p -5.27% Bakkavor Group (BAKK) 90.00p -4.46% Fidelity China Special Situations (FCSS) 192.40p -4.04% Derwent London (DLN) 2,074.00p -3.71% Bridgepoint Group (Reg S) (BPT) 256.00p -3.69% Bodycote (BOY) 562.50p -3.43% OSB Group (OSB) 421.60p -3.21% Rathbones Group (RAT) 1,686.00p -3.10% Energean (ENOG) 943.50p -3.08% Savills (SVS) 975.00p -3.08%

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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