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(Alliance News) - Stocks in London were lower on Wednesday as UK inflation eased from double-digits in August, though remained near 40-year highs, just a day after inflation in the US topped expectations.
"There has been a fresh bout of anxiety on financial markets amid worries that inflation is still proving to be a formidable opponent to take down... The expectation is that the Bank of England won't now push down quite as hard on the monetary brake pedal as the Federal Reserve is forecast to do in terms of rate hikes after the US inflation snapshot came in higher than expected," said Susannah Streeter, analyst at Hargreaves Lansdown.
The FTSE 100 index closed down 108.56 points, or 1.5% at 7,277.30 on Wednesday. The FTSE 250 ended down 318.01 points, or 1.7%, at 18,849.20. The AIM All-Share closed down 12.31 points, or 1.4%, at 868.34.
The Cboe UK 100 ended down 1.6% at 727.11, the Cboe UK 250 closed down 1.8% at 16,274.24, and the Cboe Small Companies ended down 1.6% at 12,768.77.
The UK consumer price index rose 9.9% year-on-year in August, unexpectedly slowing from 10.1% in July. Consensus, according to FXStreet, was for the rate reading to tick up to 10.2%.
July's figure had been the highest since current records began in 1997 and at a level, according to models, not seen since 1982. Inflation remains far higher than the Bank of England's 2% target.
A fall in the price of motor fuels made the largest downward contribution, while rising food prices were the largest upward contributor.
The print comes a day after US consumer price growth topped expectations in August.
The annual inflation rate for August was 8.3%, beating forecast, according to FXStreet, of 8.1%, but still easing off July's rate of 8.5%.
The Fed will unveil its latest interest rate decision on Wednesday next week, with a 75 basis point rate hike now 90% priced in by markets, according to the CME's FedWatch tool.
The Bank of England reveal its own interest rate decision next Thursday.
Craig Erlam, senior market analyst at Oanda said: "The [UK] data won't in all likelihood change the outcome of the [Bank of England] meeting next week, with 75 basis points now heavily backed but 50 also possible. The UK still has a major inflation problem and the central bank has a lot of catching up to do after dragging its feet for much of the year so far."
The pound was slightly stronger on the back of the unexpected easing inflation. Sterling was quoted at USD1.1588 at the London equities close Wednesday, up from USD1.1524 at the close on Tuesday.
Stocks in New York were in the green at the London equities close, with the Dow Jones Industrial Average up 0.4%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.8%.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt ended down 1.2%.
The euro stood at EUR0.9997 at the European equities close Wednesday, up slightly against USD0.9992 at the same time on Tuesday.
Against the yen, the dollar was trading at JPY142.70 late Wednesday, down compared to JPY144.23 late Tuesday.
In the FTSE 100, Ocado extended losses after a 15% fall on Tuesday resulting from a dim sales outlook for its joint venture, Ocado Retail.
A downgrade from Credit Suisse on Wednesday morning kept Ocado in the red. The stock was cut to 'underperform' from 'neutral', pushing the stock to finish 8.2% lower.
In the mid-caps, Aston Martin was down 2.3%. The luxury car maker is facing a GBP150 million lawsuit from two former car dealers, the Financial Times reported.
The dealers claim they are owed around GBP150 million for underwriting Aston Martin's development of the Valkyrie hypercar.
The claim follows Aston Martin's announcement back in June of 2021 that it had filed civil legal proceedings against Nebula Project, alleging that Nebula had failed to pay to Aston Martin some customer deposits received for the Valkyrie.
Dunelm was up 3.5% as it surpassed pre-pandemic annual sales for a second consecutive year.
Total sales in the financial year to July 2 were up 18% at GBP1.58 billion from GBP1.34 billion the year before. This compares to GBP1.10 billion for financial year 2019.
"We feel confident and well prepared to weather the current economic pressures - we emerged from an unprecedented global pandemic as a bigger, better business and we believe we have the tools in place to do that again," said Chief Executive Officer Nick Wilkinson.
Elsewhere in London, Fundsmith shares were up 10% as the investor announced it intends to be placed in voluntary liquidation, with proceeds from winding up to be returned to its shareholders.
Fundsmith invests in consumer-oriented companies in developing countries. It said that it believes the liquidation proposal is in the "best interests" of its shareholders.
Naked Wines sank 38%. The firm said it is mulling plans to improve profit and keep a lid on costs as it grapples with slower sales progress due to pandemic tailwinds unwinding.
Inspirit Energy surged 36%. The heat and power appliances manufacture jumped as it announced that further testing of a heat recovery system in Poland using its new technology resulted in near doubling in the power output.
Brent oil was quoted at USD95.38 a barrel at the London equities close Wednesday, up from USD93.12 late Tuesday.
Gold was quoted at USD1,705.20 an ounce at the London equities close Wednesday, up against USD1,704.90 at the close on Tuesday.
In Thursday's UK corporate calendar, there is a trading statement from rail and coach ticketing firm Trainline as well as first quarter results from online trading platform IG Group.
In the economic calendar, there is US unemployment and retail sales data at 1330 BST. Before then, France will release its CPI print at 0745 BST.
By Heather Rydings; heatherrydings@alliancenews.com
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