London stocks fall as UK annual inflation tops 10%

Shares in London fell on Wednesday as the FTSE 100 index recorded a three-day winning streak after data showed UK consumer price inflation jumped to 10.1% in July, making betting on more aggressive interest rate hikes by the Bank of England.

The blue-chip index ended down 0.3%, dragged down by declines in insurer and bank stocks. The persimmon slid 7.8% after the homebuilder posted a drop in half-year profits.

Official figures showed consumer price inflation hit a higher-than-expected 10.1% in July, its highest level since February 1982, and up from an annual rate of 9, 4% in June, with soaring food prices intensifying the squeeze on household budgets. The data fueled investor bets that the Bank of England would continue to rapidly raise interest rates, with markets now pricing in an 85% chance of an interest rate hike of half a percentage point in September.

“We now see risks tilted towards an even more intense and prolonged upside cycle with inflation expectations increasingly likely to destabilize further in the months ahead,” wrote Sanjay Raja, senior economist at Deutsche Bank. in a note. “We see the peak of inflation postponed to next year, with inflation expected to remain in double digits at least until the end of the second quarter of 2023.”

Still, the FTSE 100 gained nearly 1.8%, outperforming the European STOXX 600 index and the US S&P 500 index, due to its exposure to commodity-related stocks and global companies. “We remain constructive in the UK market amid high commodity prices, while many large-cap defensive and value names may perform well in the current macro environment,” said Hussain Mehdi, investment strategist at HSBC Asset Management.

The domestically focused FTSE 250 midcap index closed down 1.5%, mitigating two-month highs. Infrastructure company Balfour Beatty jumped 10.5% after posting a 42% rise in underlying operating profit in the first half and announcing a dividend hike.

Cineworld plunged 60.4% to a record low after the world’s second-largest cinema chain warned that admission levels to its theaters are expected to remain lower than expected until November due to limited movie releases .

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)