UK stocks slip as inflation holds before Bank of England rate decision
London equities trade slightly lower on Wednesday as investors weigh fresh inflation data and reposition before the Bank of England's policy decision. The weaker tone is led by consumer staples, utilities and energy stocks, while easing expectations for a later rate increase offer some support to banks and housebuilders.
Highlights
- FTSE 100 falls 0.14% to 10,479.77 and FTSE 250 drops 0.4% after UK inflation holds steady at 2.8% for May.
- British American Tobacco drops 1.7%, utilities fall 1.1%, and BP and Shell each lose 0.7% as oil prices remain below $80 a barrel.
- Barclays gains 2% after BofA Global Research raises its price target, Standard Chartered rises 1.3%, and housebuilders advance 1.5% as UK house prices increase.
Inflation data shapes early market moves
As reported by Reuters, the FTSE 100 falls 0.14% to 10,479.77 points by 0936 GMT, while the midcap FTSE 250 slips 0.4% as markets digest a steady UK inflation reading for May.British inflation unexpectedly holds at 2.8%, below the 3% increase economists polled by Reuters had expected. The reading prompts traders to slightly trim expectations for a rate hike later this year, even as it keeps attention firmly on the Bank of England's upcoming decision.
Nick Saunders, chief executive of online investment platform Webull UK, says investors face a difficult balance because signs of economic resilience can reinforce the case for tighter monetary policy.
Sector declines offset gains in banks and housing
Consumer staple shares are among the main drags on the market, with British American Tobacco down 1.7%. Utilities post the sharpest sector fall, dropping 1.1%, while BP and Shell each lose 0.7% as oil prices remain steady below $80 a barrel.Some financial stocks outperform, with Barclays rising 2% after BofA Global Research lifts its price target, and Standard Chartered gaining 1.3%. Housebuilders advance 1.5% after data shows British house prices rise in the year to April, while recruiter Hays adds 1.5% after selling its businesses in six European countries.
In our earlier coverage of UK inflation holding at 2.8% in May, we explained that the reading defied forecasts for a slowdown and pointed to lingering price pressures across the economy. We also noted that the data kept the Bank of England firmly in focus, complicating policymakers’ assessment of whether underlying inflation is easing fast enough ahead of upcoming rate decisions.
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