London stocks were steady by midday on Wednesday, paring earlier losses as banks continued to recover, despite an unexpected jump in consumer price inflation that puts pressure on the Bank of England to hike rates.
The FTSE 100 was up 0.1% at 7,539.89, while sterling was 0.5% firmer against the dollar at 1.2276 after data from the Office for National Statistics showed that CPI in the year to February ticked higher, driven by the soaring cost of food.
Inflation rose to 10.4% from 10.1% in January, coming in above expectations of 9.9%. On a monthly basis, CPI rose to 1.1% compared to 0.8% in February 2022.
The largest upward contributions came from restaurants and cafes, which the ONS said was driven by increases in the cost of alcohol, as well as food, and clothing. Food prices soared by 18.2% over the year.
Core inflation, which strips out the more volatile elements of food, energy, alcohol and tobacco, also rose sharply, to 6.2% from 5.8% in January.
ONS chief economist Grant Fitzner said: “Inflation ticked up in February mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
“Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.
“These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for some seven months.”
The inflation figures came just a day before the Bank of England’s latest policy announcement.
Neil Wilson, chief market analyst at Markets.com, said: “Inflation is on the rise, lurching in the wrong direction and posing a headache for the Bank of England.
“This is going to have the Bank of England more likely than not raising rates. Hawks will point to this as a clear sign that inflation needs tackling still, whilst doves will be pinning their arguments on the Office for Budget Responsibility’s rosy forecast for inflation to return to 2.9% this year. As I’ve consistently said, once inflation is out the bottle it’s not going to easily be put back in.”
Looking ahead to the rest of the day, investors were eyeing a policy announcement from the Federal Reserve, due at 1800 GMT.
In equity markets, banks pushed higher, still recovering from their recent battering. HSBC, Barclays, Standard Chartered, NatWest and Lloyds were among the top performers.
Housebuilder Vistry gained after it reported better-than-expected full-year profits and said market conditions were improving. The company posted a 21% rise in adjusted pre-tax profit to £418.4m for the year to December 31 against an average estimate of £411.1m.
Elsewhere, software, security and cloud services specialist Bytes Technology rallied after it said annual gross profit and adjusted operating earnings would be up 20%.
In broker note action, Marks & Spencer was boosted by rating upgrades at Exane, Goldman Sachs and Citi.
However, British Land was knocked lower by a downgrade to ‘sell’ at Goldman. Segro and Land Securities also lost ground.
Market Movers
FTSE 100 (UKX) 7,539.89 0.05%
FTSE 250 (MCX) 18,712.47 -0.35%
techMARK (TASX) 4,514.86 -0.29%
FTSE 100 – Risers
HSBC Holdings (HSBA) 570.50p 2.98%
Barclays (BARC) 146.68p 2.47%
Standard Chartered (STAN) 657.80p 2.21%
Ocado Group (OCDO) 435.70p 2.09%
NATWEST GROUP (NWG) 277.20p 1.76%
Melrose Industries (MRO) 155.65p 1.63%
B&M European Value Retail S.A. (DI) (BME) 478.50p 1.25%
JD Sports Fashion (JD.) 171.90p 1.24%
Lloyds Banking Group (LLOY) 48.74p 1.20%
Kingfisher (KGF) 272.30p 1.11%
FTSE 100 – Fallers
British Land Company (BLND) 382.50p -4.11%
SEGRO (SGRO) 720.60p -3.15%
Land Securities Group (LAND) 598.60p -2.41%
Severn Trent (SVT) 2,746.00p -2.21%
Unite Group (UTG) 897.00p -1.97%
Rolls-Royce Holdings (RR.) 147.44p -1.71%
Airtel Africa (AAF) 107.90p -1.64%
Smurfit Kappa Group (CDI) (SKG) 2,928.00p -1.61%
Rio Tinto (RIO) 5,257.00p -1.55%
Vodafone Group (VOD) 91.42p -1.35%
FTSE 250 – Risers
Marks & Spencer Group (MKS) 154.55p 4.39%
ASOS (ASC) 784.50p 3.22%
Bytes Technology Group (BYIT) 385.80p 2.72%
Vistry Group (VTY) 751.50p 2.66%
IP Group (IPO) 57.55p 1.95%
Investec (INVP) 457.70p 1.91%
easyJet (EZJ) 489.70p 1.72%
Centamin (DI) (CEY) 100.00p 1.56%
TI Fluid Systems (TIFS) 100.40p 1.52%
Capricorn Energy (CNE) 232.00p 1.49%
FTSE 250 – Fallers
4Imprint Group (FOUR) 4,790.00p -5.89%
Ferrexpo (FXPO) 114.70p -4.26%
UK Commercial Property Reit Limited (UKCM) 49.25p -3.43%
Hammerson (HMSO) 23.31p -3.36%
Urban Logistics Reit (SHED) 122.50p -2.78%
NB Private Equity Partners Ltd. (NBPE) 1,525.00p -2.56%
Grainger (GRI) 225.80p -2.50%
IWG (IWG) 159.35p -2.48%
Safestore Holdings (SAFE) 914.50p -2.45%
TR Property Inv Trust (TRY) 283.00p -2.41%v
