Stocks red as inflation dampens rate cut hopes

(Alliance News) - Stock prices in London were downbeat at midday, with the FTSE 100 barely in the green after underwhelming local data dampened hopes of a near-term interest rate cut from the Bank of England.

Meanwhile, in political news, Labour presented a "packed" legislative agenda in the annual King's Speech, focused on improving living standards by driving economic growth, the first of the UK prime minister's five "missions for national renewal".

Of the many measures proposed, Labour revived plans to phase out smoking, introduced a planned weapons crackdown, outlined changes to employment rights, as well as new regulations for water companies.

The FTSE 100 index was up 0.19 points at 8,165.03. The FTSE 250 was down 94.81 points, or 0.5%, at 21,119.21, and the AIM All-Share was down 0.47 points, or 0.1%, at 786.51.

The Cboe UK 100 was down 0.1% at 814.85, the Cboe UK 250 was down 0.3% at 18,403.00, and the Cboe Small Companies was down 0.1% at 17,149.45.

Local equities took a hit on Wednesday, after UK consumer price inflation remained at the Bank of England's target after nearly three years of loftier readings.

According to Dan Coatsworth, an investment analyst at AJ Bell, stocks took a hit because "components of the latest inflation data lowered the chances of a near-term interest rate cut from the Bank of England."

Data from the Office for National Statistics showed that the rate of yearly consumer price growth was unchanged at 2.0% in June. The same rate was registered in May, fading from 2.3% in April. On a monthly basis, consumer prices grew 0.1% in June, compared to 0.3% in May.

Separate data showed that UK producer input prices declined 0.4% annually in June, the decline easing from a revised fall of 0.7% in May. On a monthly basis, producer input prices declined 0.8% in June, following a revised fall of 0.6% in May.

As Coatsworth noted, services inflation also looks too high for comfort. He added that the Bank "has long said it is data-driven and today' numbers don't look soft enough across the board to convince the policy committee to change gear."

In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.3%, similarly following inflationary data.

According to Eurostat, annual consumer price inflation in the eurozone slowed slightly to 2.5% in June, from 2.6% in May. The figure was unchanged from the preliminary estimate earlier in July.

The highest contributor to annual price increases was the services sector, Eurostat noted.

In June 2023, the annual inflation rate stood at 5.5%. On a monthly basis, consumer prices rose 0.2% in June from May. They had risen at the same pace in May from April.

The pound was quoted at USD1.3038 at midday on Wednesday in London, higher compared to USD1.2957 at the equities close on Tuesday. The euro stood at USD1.0942, up against USD1.0884. Against the yen, the dollar was trading at JPY156.37, down compared to JPY158.57.

In the FTSE 100, HSBC was up 0.1%.

The bank has announced that Chief Financial Officer Georges Elhedery will take over as chief executive in September, succeeding Noel Quinn in the role after Quinn announced his retirement from the bank in April.

Elhedery joined HSBC in 2005 and was appointed to the board and as chief financial officer in January 2023. His appointment follows Quinn's unexpected retirement after an "intense" five years in the role.

"Georges Elhedery had been the favourite to get the top job at HSBC ever since Noel Quinn said he was stepping down, and confirmation that he will become the next CEO should reassure investors. He is seen as a safe choice and a solid pair of hands who already knows the business inside and out," said AJ Bell's Coatsworth.

"Safe and boring is arguably what a bank needs, rather than a maverick visionary. Running a bank doesn’t require a thirst for innovation in the way a technology firm does; it needs someone with attention to detail, good communication skills and a sharp focus. Ultimately, Elhedery will need to ensure that each of the cogs that make up the business are running smoothly."

On AIM, K3 Business Technology lost 7.4%.

For the six months to May 31, the business-critical software solutions provider reported revenue from continuing operations of GBP15.5 million, down from GBP20.3 million a year prior.

Pretax loss narrowed to GBP2.8 million from GBP2.9 million, due to lower expenses, but loss per share widened to 6.6 pence from 6.5p in the previous year, due to a profit from discontinued operations that benefited the earlier period.

By contrast, Great Western Mining gained 32%.

The firm saw its shares jump, after the Nevada Division of Environmental Protection granted a new water pollution control permit to Western Milling LLC, authorising the construction, operation and closure of approved mining facilities.

The permit will become effective on July 31, subject to any appeals. Accordingly, Western Milling will shortly begin the commissioning process.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 1.2%.

The 'Trump trade' failed to carry sentiment through to midday, after Republicans approved their policy platform at the party's national convention, with a more radical shadow manifesto raising fears about the future of American democracy.

Project 2025 has been characterised by opponents as an authoritarian, right-wing wish list. Its 887-page "Mandate for Leadership" sets out how to replace thousands of federal workers with ultra-conservative loyalists should Trump prevail against Democratic President Joe Biden in November.

It calls for a makeover of almost every function of the federal government, reshaping its numerous agencies to centralise power in the White House and push policy to the right on everything from abortion to immigration.

Brent oil was quoted at USD83.66 a barrel at midday in London on Wednesday, down from USD83.89 late Tuesday.

Gold was quoted at USD2,473.40 an ounce, up against USD2,463.64.

Still to come on Wednesday's economic calendar, there is a handful of data from the US, including building permits, industrial production, and EIA crude oil stocks. Federal Reserve Governor Christopher Waller is also due to speak.

By Holly Beveridge, Alliance News senior reporter

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