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(Sharecast News) - London's financial markets experienced declines on Wednesday, influenced by an unexpected rise in UK inflation and underwhelming corporate earnings.
The FTSE 100 index fell 0.62% to close at 8,712.53 points, while the FTSE 250 dropped 0.83% to 20,707.79 points.
In currency markets, sterling was last down 0.33% on the dollar, trading at $1.2572, while it remained relatively stable against the euro to change hands at €1.2077.
"Recent threats by US president Donald Trump to impose a 25% tariff on car imports have unsettled the German automotive sector," commented IG senior technical analyst Axel Rudolph.
"The German DAX 40, down over 1.5%, has dragged other European indices down with it, all of which are in the red.
"Higher-than-expected UK inflation, close to levels seen a year ago, didn't improve sentiment."
Rudolph noted that US indices such as the S&P 500 and Nasdaq 100 were also slightly under pressure, but remained close to their record highs as fourth quarter earnings thinned out.
"Natural gas prices surge higher, to levels [last] seen in March 2024, as extreme cold increases heating demand and freezes oil and gas wells, reducing output.
"The crude oil price is on track for its third straight positive day while gold and silver prices give back some of their recent gains."
UK inflation rises more than expected in January
In economic news, UK inflation rose more than expected in January, with consumer prices increasing by 3% year-on-year, up from 2.5% in December.
The Office for National Statistics had forecast a smaller rise to 2.8%.
On a monthly basis, inflation declined by 0.1%, a smaller drop than the 0.6% fall recorded a year earlier.
Transport and food prices were the biggest contributors to inflation, while housing and household services provided some downward pressure.
Core inflation, which excludes volatile items like energy and food, accelerated to 3.7% from 3.2%.
Services inflation also increased, reaching 5% from 4.4%, driven in part by a sharp rise in private school fees following the introduction of a 20% VAT charge.
"Inflation increased sharply this month to its highest annual rate since March last year," said ONS chief economist Grant Fitzner.
"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."
UK house prices meanwhile continued to rise at an accelerated pace, climbing 4.6% year-on-year in December compared to 3.9% in November.
The national average house price stood at £268,000. Rental costs also remained elevated, with private rents up 8.7% in the year to January, though that marked a slight easing from December's 9% growth.
"With house prices remaining buoyant, this indicates that the wider economy continues to stabilise, and people are feeling confident in their personal financial positions," said Nathan Emerson, chief executive of Propertymark.
"We have also witnessed interest rates track downward steadily since last summer and will hopefully see continued progression heading further into the year, should the Bank of England feel confident that conditions are safe to consider further base rate dips.
"With governments across all UK nations planning on building more new homes at scale over the coming years, if done effectively, this should help even out house prices and supply across the entire country."
Across the Atlantic, United States housing construction saw a sharp slowdown in January, with housing starts falling 9.8% to an annualised 1.37 million units, down from December's 10-month high of 1.52 million.
Analysts had expected a more moderate decline to 1.4 million.
Severe winter weather was blamed for the drop, particularly affecting single-family home construction, which fell 8.4%, and multi-unit projects, which declined 11%.
However, building permits edged up 0.1% to 1.48 million, indicating potential stability in the months ahead.
Housing completions rose 7.6% from December to 1.65 million.
US mortgage applications also fell sharply, declining by 6.6% in the week ended 14 February.
That reversed gains from the previous two weeks, despite falling interest rates.
Refinancing applications dropped 7%, while applications for home purchases declined by 6%.
Further afield, New Zealand's central bank cut its key interest rate by 50 basis points to 3.75%, continuing its easing cycle.
The Reserve Bank of New Zealand cited global economic uncertainty, trade disruptions, and geopolitical tensions as risks to growth.
Inflation remained within the central bank's target range, and policymakers signalled confidence that further rate cuts may be appropriate to support the economy.
Airlines descend, BP rises on possible sale of Castrol business
On London's equity markets, Glencore dropped 5.26% after reporting a decline in annual core earnings due to weaker commodity prices.
Despite announcing a $2.2bn return to shareholders via dividends and buybacks, the miner's shares slid further after its chief executive suggested the company might abandon its UK primary listing in favor of New York or another market with a stronger valuation.
Airline stocks also struggled, led by Jet2, which plunged 10.67% after warning that profit margins would be pressured by rising costs in the year ahead.
That dragged down easyJet by 4.52%, Wizz Air by 3.88%, and British Airways owner International Consolidated Airlines Group by 3.03%.
Trainline slumped 7.75% following a downgrade to 'neutral' at JPMorgan, while John Wood Group tumbled 15.67% after Kepler Cheuvreux cut its rating to 'reduce.'
HSBC dipped 0.37% despite reporting higher annual profits and announcing a $2bn share buyback.
On the upside, Antofagasta gained 0.82% after JPMorgan Cazenove upgraded the stock two levels to 'overweight,' citing a strong long-term copper outlook.
BAE Systems edged up 0.26% after reversing earlier losses, buoyed by a rise in full-year profits and a record order backlog.
BP rose 1.03% on reports that it is considering a potential $10bn sale of its Castrol lubricants business, while Pershing Square Holdings climbed 1.16% after increasing its bid to acquire a larger stake in real estate developer Howard Hughes, proposing a $900m deal for 10 million newly-issued shares at $90 each.
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 8,712.53 -0.62%
FTSE 250 (MCX) 20,707.79 -0.83%
techMARK (TASX) 4,767.08 -0.52%
FTSE 100 - Risers
Unilever (ULVR) 4,401.00p 1.41%
SSE (SSE) 1,480.50p 1.16%
Pershing Square Holdings Ltd NPV (PSH) 4,540.00p 1.16%
Pearson (PSON) 1,363.00p 1.11%
National Grid (NG.) 953.00p 1.00%
Smurfit Westrock (DI) (SWR) 4,359.00p 0.93%
Antofagasta (ANTO) 1,850.50p 0.84%
Scottish Mortgage Inv Trust (SMT) 1,125.00p 0.67%
BAE Systems (BA.) 1,345.00p 0.64%
Severn Trent (SVT) 2,443.00p 0.25%
FTSE 100 - Fallers
Glencore (GLEN) 327.80p -7.28%
easyJet (EZJ) 497.30p -3.92%
JD Sports Fashion (JD.) 81.12p -3.41%
Anglo American (AAL) 2,370.00p -3.38%
CRH (CDI) (CRH) 8,416.00p -3.22%
Ashtead Group (AHT) 4,947.00p -3.15%
Barratt Redrow (BTRW) 426.00p -3.05%
Prudential (PRU) 705.00p -3.00%
Spirax Group (SPX) 7,600.00p -3.00%
International Consolidated Airlines Group SA (CDI) (IAG) 326.70p -3.00%
FTSE 250 - Risers
PayPoint (PAY) 674.00p 3.22%
Syncona Limited NPV (SYNC) 94.90p 2.48%
Future (FUTR) 1,029.00p 2.29%
Oxford Nanopore Technologies (ONT) 129.90p 2.28%
Indivior (INDV) 868.00p 1.88%
Harworth Group (HWG) 165.50p 1.85%
Mony Group (MONY) 203.60p 1.80%
HGCapital Trust (HGT) 526.00p 1.74%
JTC (JTC) 970.00p 1.68%
Pacific Horizon Inv Trust (PHI) 598.00p 1.36%
FTSE 250 - Fallers
Wood Group (John) (WG.) 24.26p -16.63%
Trainline (TRN) 317.60p -7.75%
Diversified Energy Company (DEC) 1,229.00p -6.33%
Dr. Martens (DOCS) 66.80p -4.71%
Wizz Air Holdings (WIZZ) 1,550.00p -4.62%
Renishaw (RSW) 3,035.00p -3.96%
WH Smith (SMWH) 1,170.00p -3.86%
Travis Perkins (TPK) 662.00p -3.85%
Bridgepoint Group (Reg S) (BPT) 377.60p -3.28%
Bodycote (BOY) 664.00p -3.07%
