FTSE 100 Live Wednesday
- Barclays fined for risk failings
- inflation tops forecasts
- Savings setback as prices jump
Market update: Rate cut jitters weigh, Rio Tinto bolsters FTSE 100
10:08 , Graeme EvansRate-sensitive stocks including Land Securities and Persimmon today fell in the FTSE 100 index after inflation figures for June came in above City forecasts.
The reading of 3.6%, which was the highest since January 2024 after another rise in food prices, fuelled worries that interest rates will take longer to fall.
Economists still see a rate cut on 7 August, although money markets are placing the probability at 87% rather than a certainty before the data was published.
ING expects cuts next month and in November but believes the Bank of England will continue to tread carefully. It added: “This latest data appears to set the bar fairly high for faster rate cuts.”
Much will depend on whether there's further loosening in the labour market, including downward pressure on wages in a report due to be published tomorrow.
The inflation jitters meant the FTSE 100 index initially stuttered before putting on 0.2% or 16.34 points to 8954.66.
The impact on mortgage affordability if interest rates end up staying higher for longer meant Persimmon fell 13p to 1178p and Barratt Redrow lost 2.5p to 374.8p.
In the property sector, Piccadilly Lights owner Land Securities fell 2% or 12p to 565.5p, student accommodation firm Unite dipped 12p to 790p and warehouse business Segro eased 6.4p to 648.6p.
London’s top flight benefited from a positive response to the latest production figures of Rio Tinto and copper-focused Antofagasta.
Rio Tinto shares rose 65.5p to 4411.5p after the mining giant reported its highest second quarter rate of iron ore output since 2018. It also said copper production for the year is on track for the higher end of its full-year guidance.
Chile’s Antofagasta also rose 45p to 1884p after progress on costs offset a slight miss on copper volumes.
British Airways owner IAG rose 5.9p to 383.1p after the ONS reported the largest June rise in air fares since 2018. Low-cost carrier easyJet added 1.6p to 527p ahead of third quarter results tomorrow.
The FTSE 250 index rose 2.43 points to 21,692.89, with Bloomsbury Publishing up 17p to 504p after issuing guidance for profit growth in the current financial year.
Barclays fined for money laundering risk failures
09:59 , Graeme EvansThe financial watchdog has fined banking giant Barclays £42 million over its “poor handling” of money laundering risks.
The Financial Conduct Authority (FCA) said the fines related to separate failings linked to the WealthTek and Stunt & Co businesses.
It fined Barclays Bank £39.3 million for “failing to adequately manage money laundering risks” related to providing banking services to Stunt & Co.
Barclays “did not gather enough information” after starting its relationship with the business and did not carry out “proper” ongoing monitoring, the FCA said.
Setback for savers as inflation spikes
08:50 , Graeme EvansThe latest inflation reading of 3.6% exceeds the average return that savers can earn, Moneyfactscompare.co.uk said today.
There are currently 1289 accounts that beat inflation - 119 easy access, 115 notice accounts, 107 variable rate ISAs, 312 fixed rate ISAs and 636 fixed rate bonds.
However, the Moneyfacts average savings rate currently sits at 3.51%, meaning that savers are in danger of losing money in real terms.
It said: “While many top paying rates have improved in the past month, it may be a short-term reprieve - there has also been a harsh cut of almost 1% when looking back at one-year fixed rate bonds this time last year.”
Rio Tinto up 2% in steady FTSE 100, AstraZeneca lower
08:27 , Graeme EvansRio Tinto shares are top of the FTSE 100 index after the mining giant reported its highest second quarter rate of iron ore production since 2018.
Shares lifted 2% or 87.5p to 4433.5p as Rio also said copper output for the year is on track for the higher end of its full-year guidance.
HSBC, British American Tobacco and Haleon also offered support to the FTSE 100 index, which recovered from a weak start to stand 3..26 points higher at 8941.58.
On the fallers board, AstraZeneca lost 138p at 10,358p and Land Securities dropped by 4.5p to 573p.
The FTSE 250 index fell 3.98 points to 21,686.48.
Inflation seen heading towards 4%
07:58 , Graeme EvansDeutsche Bank believes tomorrow’s labour market data will carry more weight when it comes to shaping the monetary policy outlook.
However, it said that today’s data won't give the Bank of England’s monetary policy committee (MPC) any sense of comfort on the inflation side.
Economist Sanjay Raja said: “Headline CPI, core CPI, services CPI, and core goods CPI now all sit above Bank staff projections.
“All of the Bank's core services measures have also increased in June. And we expect headline CPI to push closer to 4% year-on-year after the summer, before beginning its slow descent back to target later next year.
“The Bank, like us, will be watching closely the implications on inflation expectations, which already look a bit uncomfortable.”
He doubts that August’s expected rate cut is in jeopardy: “There's enough of a slowdown in GDP and the labour market to warrant a 'gradual and careful' easing of monetary policy.
“But the onus now rests on the labour market to shape how far and how fast the MPC can cut this year and next.”
Inflation surprise clouds rate cut outlook
07:34 , Graeme EvansThe unexpected rise in inflation is unlikely to cause the Bank of England to deviate from its quarterly rate cutting path at its next meeting on 7 August.
However, Capital Economics said the reading increased the pressure on the Bank to continue to cut rates at a gradual pace.
It said the big disappointment in today’s release concerned the crucial services inflation rate, which remained stuck at 4.7%.
The consultancy said: “We think that CPI inflation will rise a bit further in the coming months. And the risk is that this increase proves more persistent and rates are cut more slowly than we expect, or not as far.”
UK inflation rate highest since January 2024
07:05 , Graeme EvansThe UK’s annual rate of inflation increased by more than expected to 3.6% in June, the highest figure since January 2024.
The reading compared with the previous month’s 3.4% and City forecasts for an unchanged figure.
The ONS said food and drink prices rose 4.5% in the year to June, the third consecutive increase in the annual rate suggesting that the squeeze on household staples is far from over.
Transport, particularly motor fuels, made the largest upward contribution to the monthly change of 0.3%.
The inflation rate stood at 2.6% in March before April’s spike to 3.5% on the back of household bill increases.
FTSE 100 seen lower after inflation setback, Dow Jones falls 1%
07:00 , Graeme EvansThe FTSE 100 index is seen opening 0.2% lower after today’s inflation reading weakened sentiment following mixed trading on Wall Street overnight.
The Dow Jones Industrial Average fell 1% and the S&P 500 lost 0.4% after figures showed an acceleration in the US inflation rate to 2.7%.
The Nasdaq Composite defied the weaker sentiment to finish 0.2% higher.
London’s top flight fell back from a record intraday high of 9017 to close at 8,938.32, a decline of 59.74 points or 0.7% in the session.
It had been due to open flat prior to today’s inflation print.
