London open: FTSE edges lower as inflation hits 3%

(Sharecast News) - London stocks edged lower in early trade on Wednesday as investors mulled a higher-than-expected UK inflation reading.

At 0840 GMT, the FTSE 100 was down 0.3% at 8,741.97.

Data released earlier by the Office for National Statistics showed the annual rate of consumer price inflation rose to 3% in January from 2.5% the month before, versus expectations for a smaller uptick to 2.8%.

On a monthly basis, CPI fell 0.1% last month, compared with a 0.6% fall in January 2024.

The ONS said the largest upward contribution to the monthly and annual changes came from transport, and food and non-alcoholic beverages, while the largest downward contribution came from housing and household services.

Core CPI - which excludes energy, food, alcohol and tobacco - was 3.7%, up from 3.2% in December. Meanwhile, services inflation ticked up to 5% from 4.4%.

The figures revealed a rise in private school fees, where prices rose by 12.7% on the month after the government imposed 20% VAT on school fees.

ONS chief economist Grant Fitzner said: "Inflation increased sharply this month to its highest annual rate since March last year.

"The rise was driven by air fares not falling as much as we usually see at this time of year, partly impacted by the timing of flights over Christmas and New Year. This was the weakest January dip since 2020.

"After falling this time last year, the cost of food and non-alcoholic drinks increased, particularly meat, bread and cereals.

"Private school fees were another factor, as new VAT rules meant prices rose nearly 13% this month."

Ruth Gregory, deputy chief UK economist at Capital Economics, said the climb in inflation will be "uncomfortable" for the Bank of England.

"We doubt this will prevent the Bank of England from cutting interest rates further. But it will mean it continues to cut rates only slowly," she said.

In equity markets, Glencore lost ground as the miner reported a fall in annual core earnings due to weaker commodities prices but said it would still return $2.2bn to shareholders via dividends and a buyback.

HSBC was also in the red even as it posted a rise in annual profits and announced a $2bn share buyback.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "There was a slight disappointment in impairments, which are higher than expected, signalling a potential shift from HSBC's historically market-leading credit quality - a trend worth keeping an eye on.

"Guidance for the new year is ahead of expectations, but much of the positive outlook was already priced in given the improved US rate environment and expected cost management efforts."

BAE Systems retreated despite reporting a jump in full-year profit and a record order backlog.

Airlines flew lower, with easyJet, IAG and Wizz all down after Jet2 warned profit margins in the year ahead would come under some pressure due to cost pressures.

Trainline tumbled after a downgrade to 'neutral' at JPMorgan Cazenove.

On the upside, Antofagasta was the top gainer on the FTSE 100 after a double upgrade to 'overweight' at JPMorgan, which cited a positive long-term copper outlook and leading medium-term copper growth.

BP gained following a report it is considering a potential sale of its lubricants business. Bloomberg cited people familiar with the matter as saying that the oil major's unit - which operates under the Castrol brand - could be worth about $10bn in a deal.

Market Movers

FTSE 100 (UKX) 8,741.97 -0.28%

FTSE 250 (MCX) 20,862.62 -0.09%

techMARK (TASX) 4,781.80 -0.21%

FTSE 100 - Risers

Antofagasta (ANTO) 1,893.50p 3.19%

Mondi (MNDI) 1,304.50p 1.40%

Pershing Square Holdings Ltd NPV (PSH) 4,540.00p 1.16%

BP (BP.) 467.20p 1.04%

Smurfit Westrock (DI) (SWR) 4,351.00p 0.74%

Barclays (BARC) 310.00p 0.58%

Rolls-Royce Holdings (RR.) 648.00p 0.56%

Shell (SHEL) 2,693.50p 0.50%

Scottish Mortgage Inv Trust (SMT) 1,123.00p 0.49%

Flutter Entertainment (DI) (FLTR) 23,270.00p 0.47%

FTSE 100 - Fallers

Glencore (GLEN) 337.85p -4.44%

easyJet (EZJ) 503.20p -2.78%

International Consolidated Airlines Group SA (CDI) (IAG) 329.70p -2.11%

Barratt Redrow (BTRW) 431.90p -1.71%

Anglo American (AAL) 2,413.50p -1.61%

HSBC Holdings (HSBA) 884.50p -1.51%

Fresnillo (FRES) 774.00p -1.28%

Persimmon (PSN) 1,214.00p -1.22%

BT Group (BT.A) 145.50p -1.12%

Smith & Nephew (SN.) 1,021.50p -1.07%

FTSE 250 - Risers

CMC Markets (CMCX) 222.50p 3.01%

Me Group International (MEGP) 229.50p 2.68%

Greencoat UK Wind (UKW) 113.10p 2.54%

Bridgepoint Group (Reg S) (BPT) 399.40p 2.36%

Bodycote (BOY) 701.00p 2.34%

Plus500 Ltd (DI) (PLUS) 2,782.00p 2.05%

Rathbones Group (RAT) 1,812.00p 1.57%

Foresight Solar Fund Limited (FSFL) 78.30p 1.42%

Ithaca Energy (ITH) 131.40p 1.23%

Investec (INVP) 544.50p 1.11%

FTSE 250 - Fallers

Wood Group (John) (WG.) 27.02p -7.15%

Trainline (TRN) 321.80p -6.99%

North Atlantic Smaller Companies Inv Trust (NAS) 3,650.00p -2.93%

Tate & Lyle (TATE) 538.00p -2.80%

Supermarket Income Reit (SUPR) 70.00p -2.10%

Carnival (CCL) 1,813.50p -1.84%

Wizz Air Holdings (WIZZ) 1,596.00p -1.78%

Fidelity Emerging Markets Limited Ptg NPV (FEML) 725.00p -1.63%

Ferrexpo (FXPO) 100.40p -1.38%

Urban Logistics Reit (SHED) 115.40p -1.37%