London stocks closed below the waterline on Wednesday, after UK inflation hit its highest level in nearly three years.
The FTSE 100 ended the session down 0.47% at 7,091.19, and the FTSE 250 was off 0.77% at 22,750.04.
Sterling was in a mixed state, last trading 0.3% higher on the dollar at $1.3856, but losing 0.1% against the euro to €1.1718.
“It’s been another mixed session for markets in Europe today, with the FTSE 100 underperforming once again, as a fresh set of inflation figures generates further concern about the ‘transitory’ narrative, so beloved of central bankers,” said CMC Markets chief market analyst Michael Hewson.
“Concerns about inflation, transitory or otherwise, have continued to dominate sentiment today, as worries over the pace and persistence of rising prices, temper optimism over the wider global recovery story.
“Markets in Europe have undergone a broadly underwhelming session in contrast to US markets, which continue to set new records.”
Fresh data released earlier in the day showed UK inflation hitting its highest level since August 2018 in June as food and transport costs rose, putting pressure on the Bank of England to raise interest rates.
Figures from the Office for National Statistics showed consumer price inflation increased to 2.5% from 2.1% in May, hitting its highest level in nearly three years and coming in above the Bank of England’s 2% target for the second month in a row.
It was also above consensus expectations of 2.2%.
The ONS said prices for food, second-hand cars, clothing and footwear, eating and drinking out, and motor fuel rose in 2021 but mostly fell in 2020, resulting in the largest upward contributions to the change in the 12-month inflation rate between May and June 2021.
Core inflation – which strips out food, energy, alcohol and tobacco – came in at 2.3% in June compared to 2.0% the month before.
“The rise was widespread, for example coming from price increases for food and for second-hand cars where there are reports of increased demand,” said ONS deputy national statistician for economic statistics Jonathan Athow.
“Some of the increase is from temporary effects, for example rising fuel prices which continue to increase inflation, but much of this is due to prices recovering from lows earlier in the pandemic.
“An increase in prices for clothing and footwear, compared with the normal seasonal pattern of summer sales, also added to the upward pressure this month.”
House prices, meanwhile, strengthened in May, bouncing back from April’s dip, with the ONS reporting that UK average house prices rose 10.0% over the year to May, rising from both April’s figure of 9.6% and the 9.9% rise seen in March.
On a monthly basis, prices nudged 0.9% higher to £255,000, returning to growth following April’s 1.9% decline.
In vaccine news, two thirds of UK adults had now received both doses of a Covid-19 vaccine, health secretary Sajid Javid said in a tweet.
Official data from the Department of Health showed that, less than a week away from a drastic easing of restrictions on 19 July, 34,997,491 people were now fully vaccinated, representing 66.4% of the adult population.
A total of 45,978,017 people had received at least one vaccine dose, or 87.3% of all UK adults.
In equity markets, homewares retailer Dunelm fell 6.25% even after reporting that annual profits would be ahead of forecasts, as fourth-quarter sales more than doubled driven by pent-up demand after stores reopened from Covi19 lockdowns.
Budget airline easyJet was knocked 4.35% lower by a downgrade to ‘neutral’ at Davy, while British Airways and Iberia parent IAG was 1.21% weaker after a downgrade to ‘market perform’ at Raymond James.
Travel-related stocks more generally were under the cosh amid ongoing pandemic concerns, with engine maker Rolls-Royce down 0.91% and tour operator TUI losing 7.19%.
Leisure and hospitality shares were also on the back foot, with Cineworld and Restaurant Group lower, by 6.09% and 3.36%, respectively.
Travel food outlet operator SSP Group retreated 4.27% after it said chief executive Simon Smith had quit to join an unnamed private equity-backed business.
On the upside, banks gained, with NatWest rising 1.64%, Lloyds Banking Group ahead 0.4%, and Barclays 0.41% firmer.
Barratt Developments rallied 2.04% after the housebuilder lifted annual profit forecasts on the back of strong demand.
Industrial thread maker Coats Group advanced 2.95% as it upgraded its full-year expectations following a “strong” first half.
Market Movers
FTSE 100 (UKX) 7,091.19 -0.47%
FTSE 250 (MCX) 22,750.04 -0.77%
techMARK (TASX) 4,432.39 -1.07%
FTSE 100 – Risers
Barratt Developments (BDEV) 711.00p 2.04%
Glencore (GLEN) 319.25p 1.75%
NATWEST GROUP PLC ORD 100P (NWG) 204.70p 1.64%
Anglo American (AAL) 2,987.50p 1.43%
Persimmon (PSN) 3,011.00p 1.14%
Evraz (EVR) 610.80p 0.76%
Taylor Wimpey (TW.) 162.50p 0.68%
British American Tobacco (BATS) 2,800.00p 0.65%
Pershing Square Holdings Ltd NPV (PSH) 2,660.00p 0.57%
Admiral Group (ADM) 3,265.00p 0.43%
FTSE 100 – Fallers
Hargreaves Lansdown (HL.) 1,617.00p -3.52%
Ocado Group (OCDO) 1,858.00p -2.99%
Halma (HLMA) 2,802.00p -2.04%
Intermediate Capital Group (ICP) 2,161.00p -1.92%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,422.00p -1.85%
Land Securities Group (LAND) 675.20p -1.80%
London Stock Exchange Group (LSEG) 7,670.00p -1.79%
Johnson Matthey (JMAT) 3,108.00p -1.58%
Vodafone Group (VOD) 117.48p -1.54%
British Land Company (BLND) 503.80p -1.52%
FTSE 250 – Risers
Trustpilot Group (TRST) 392.80p 2.99%
Coats Group (COA) 69.80p 2.95%
Helios Towers (HTWS) 164.20p 2.87%
Countryside Properties (CSP) 516.00p 2.38%
Dr. Martens (DOCS) 461.00p 2.04%
Tullow Oil (TLW) 52.00p 1.84%
HICL Infrastructure (HICL) 169.40p 1.56%
Bellway (BWY) 3,320.00p 1.44%
RHI Magnesita N.V. (DI) (RHIM) 4,212.00p 1.30%
888 Holdings (888) 379.80p 1.28%
FTSE 250 – Fallers
TUI AG Reg Shs (DI) (TUI) 322.60p -7.19%
Dunelm Group (DNLM) 1,351.00p -6.25%
Cineworld Group (CINE) 64.10p -6.09%
Hammerson (HMSO) 36.10p -4.77%
easyJet (EZJ) 839.60p -4.35%
PureTech Health (PRTC) 334.00p -4.30%
SSP Group (SSPG) 253.10p -4.27%
Tate & Lyle (TATE) 729.00p -3.78%
Grainger (GRI) 295.00p -3.73%
Mitchells & Butlers (MAB) 258.40p -3.58%
