London close: Stocks fall ahead of Fed as Brexit rumours swirl

(Sharecast News) - London's top flight index finished just below the waterline on Wednesday, as investors digested a sharp decline in UK inflation and eyed a rate announcement by the US Federal Reserve.
The FTSE 100 ended the session down 0.44%at 6,078.48 , while the FTSE 250 was down 0.11% at 17,795.26.

Sterling was stronger in afternoon trading, last rising 0.79% against the dollar to $1.2991, and advancing 0.85% on the euro to €1.0972.

"As investors continue to await the outcome of the final Federal Reserve meeting before November's election - which is hurtling towards us like a speeding train - the pound soured the FTSE's session, seemingly thanks to some Brexit speculation," said Spreadex analyst Connor Campbell.

"Reports in the Telegraph of a 'tentative, modest' concession from the UK regarding the fisheries dispute with the EU, as David Frost travels to Brussels for an earlier than expected tete-a-tete with Michel Barnier, has raised hopes that a Brexit deal isn't off the table, despite public tensions following the announcement of the UK Internal Market Bill."

Campbell said there had been "plenty of negative headlines" to go alongside that rumour.

"But, willing to cling onto any sign that a no deal exit can be avoided, the pound surged on the news.

"This put a bullet in the need of the FTSE's rebound."

Figures released earlier by the Office for National Statistics showed that inflation plunged in August as the government's Eat Out to Help Out scheme cut the cost of restaurant bills.

Annual consumer price inflation fell to 0.2% from 1% in July as the Chancellor Rishi Sunak's subsidy for meals out and a VAT cut for the hospitality industry reduced prices.

On average, economists had expected the rate of price increases to drop to zero.

Prices in the hotels and restaurant sector fell 2.8% compared with a 1.8% increase in July.

Clothing and footwear prices also fell as retailers delayed price rises for autumn ranges and air fares fell in August for the first time on record.

The unusually big drop for inflation showed the effects of the Covid-19 crisis hitting large swathes of the economy.

Recreation and culture was the only sector to register a small increase to 2.8% from 2.6%.

"The cost of dining out fell significantly in August thanks to the Eat Out to Help Out scheme and VAT cut, leading to one of the largest falls in the annual inflation rate in recent years," said ONS statistician Jonathan Athow.

Capital Economics said August was probably the low point for inflation after the Eat Out to Help Out subsidy finished at the end of August.

"The VAT cut for the hospitality industry will expire on 12 January [and] the drag on inflation from the previous collapse in the oil price will continue to fade," said economist Thomas Pugh.

"But the big picture is that it will be a few years before the economy is strong enough to sustain CPI inflation at the 2% target."

Market participants were awaiting the latest interest rate decision from the US Federal Reserve, due after the close of European markets.

The central bank is widely expected to leave its target Fed Funds range unchanged between 0.00 and 0.25%.

"Today's FOMC meeting looks set to provide the main event of the day, with Powell expected to flesh out the new inflation targeting proposed in his Jackson Hole speech," said IG analyst Joshua Mahony.

"With few expecting any shift in monetary policy, today will be as much about any shift in economic forecasts and the new inflation policy than rates or QE."

In equity markets, engine maker Rolls-Royce was 5.39% weaker, with GKN owner Melrose Industries and British Airways parent IAG joining it on the downside, falling 2.56% and 0.9% respectively.

Supermarket retailer Morrisons was also in the red by 3.99% after a downgrade to 'underweight' from 'neutral' at JPMorgan Cazenove.

Trading platform Plus500 fell 1.1%, despite saying it was very confident about its outlook after momentum from the first half continued into the second half.

Revenue stayed strong supported by higher customer numbers and use of its platform is at "elevated levels", it said.

Redrow lost 1.75%, after saying that full-year profits slumped 66% due to the coronavirus and associated lockdowns, as reservations were up in the first 11 weeks of the new fiscal year and the housebuilder expects to resume dividend payments in 2021.

On the upside, B&Q and Castorama owner Kingfisher rose 0.99%, having fallen sharply on Monday on the back of French DIY sales data.

Oil and gas exploration company Energean gained 20.31% after securing two new gas shale agreements for its flagship Karish project off Israel.

Market Movers

FTSE 100 (UKX) 6,078.48 -0.44%
FTSE 250 (MCX) 17,795.26 -0.11%
techMARK (TASX) 3,859.19 -0.86%

FTSE 100 - Risers

Land Securities Group (LAND) 557.60p 2.73%
3i Group (III) 974.60p 2.59%
Mondi (MNDI) 1,580.50p 2.46%
Ferguson (FERG) 7,604.00p 2.40%
Experian (EXPN) 3,065.00p 2.37%
British Land Company (BLND) 358.50p 1.99%
Evraz (EVR) 339.20p 1.83%
Admiral Group (ADM) 2,742.00p 1.73%
Lloyds Banking Group (LLOY) 26.59p 1.64%
Auto Trader Group (AUTO) 576.80p 1.62%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 192.35p -5.39%
Morrison (Wm) Supermarkets (MRW) 171.00p -3.99%
Melrose Industries (MRO) 122.00p -2.56%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,270.00p -2.07%
London Stock Exchange Group (LSE) 8,974.00p -1.92%
Pennon Group (PNN) 1,025.00p -1.91%
Tesco (TSCO) 217.20p -1.82%
HSBC Holdings (HSBA) 316.55p -1.80%
Severn Trent (SVT) 2,429.00p -1.66%
Rio Tinto (RIO) 5,050.00p -1.66%

FTSE 250 - Risers

Energean (ENOG) 629.00p 20.31%
Royal Mail (RMG) 242.30p 5.35%
National Express Group (NEX) 127.00p 5.05%
Hiscox Limited (DI) (HSX) 931.80p 5.00%
PureTech Health (PRTC) 281.50p 4.26%
Dixons Carphone (DC.) 93.80p 3.93%
Pets at Home Group (PETS) 311.40p 3.80%
Weir Group (WEIR) 1,344.50p 3.62%
Hochschild Mining (HOC) 244.00p 3.38%
Investec (INVP) 140.25p 3.01%

FTSE 250 - Fallers

Hammerson (HMSO) 23.40p -7.73%
SSP Group (SSPG) 204.20p -6.24%
TUI AG Reg Shs (DI) (TUI) 317.40p -5.96%
Moneysupermarket.com Group (MONY) 284.00p -5.40%
Network International Holdings (NETW) 376.20p -5.00%
Calisen (CLSN) 155.00p -4.29%
UK Commercial Property Reit Limited (UKCM) 67.60p -3.70%
Helios Towers (HTWS) 162.40p -2.99%
Serco Group (SRP) 133.50p -2.84%
Computacenter (CCC) 2,302.00p -2.79%