London pre-open: Stocks seen up as inflation falls to two-year low

(Sharecast News) - London stocks were set to rise at the open on Wednesday following upbeat US and Asian sessions, as investors mulled a bigger-than-expected drop in UK inflation. The FTSE 100 was called to open up around 25 points at 7,465.

Data released earlier by the Office for National Statistics showed that inflation fell to a two-year low in October as energy prices eased.

The annual rate of consumer price inflation declined to 4.6% from 6.7% in September, beating economists' expectations for a fall to 4.8%.

The largest downward contribution to the monthly change in inflation came from housing and household services, the ONS said, where the annual rate for CPI was the lowest since records began in January 1950.

The figures showed that gas costs fell by 31%, versus a 1.7% increase in September. Meanwhile, electricity costs were down 15.6% in October compared with a 6.7% rise the month before.

ONS chief economist Grant Fitzner said: "Inflation fell substantially on the month as last year's steep rise in energy costs has been followed by a small reduction in the energy price cap this year.

"Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years."

On a monthly basis, CPI was unchanged in October, compared with a rise of 2.0% last year.

Paul Dales, chief UK economist at Capital Economics, said: "Looking ahead, our forecast is that the downward trends in CPI and core inflation will stall over the next few months before starting to edge lower again in February.

"But even then, we think the restrictions on labour supply and the stickiness of inflation expectations will mean that inflation fades slowly rather than suddenly. That explains why we think the Bank won't feel comfortable cutting interest rates until late in 2024 rather than in mid-2024 as priced into financial markets."

In equity markets, consumer products group Reckitt Benckiser announced that Chris Sinclair is to step down as chair next May and will be replaced by board member Sir Jeremy Darroch.

Darroch, who joined the board as senior independent non-executive director in November 2022, was boss of Sky between 2018 and 2021, and has held board positions at Marks & Spencer and Burberry. He also worked at Reckitt rival Procter & Gamble for 12 years earlier in his career, working up to become the European finance director of healthcare.

SSE's half-year report showed adjusted earnings per share of 37.0p, exceeding expectations due to improved operational performance and lower expected taxes.

However, reported earnings per share were 28.3p, impacted by non-cash accounting impairments and financial guarantee liabilities. Despite increased investments in SSEN Transmission and a strong performance in SSE Thermal, profitability in SSEN Distribution was affected by cost inflation recovery timing.