21st May 2025 17:08
(Alliance News) - The FTSE 100 held modest gains at the close on Wednesday while a strong inflation print sent sterling to a three-year high.
The FTSE 100 index closed up 5.34 points, 0.1%, at 8,786.46.
The FTSE 250 fell 146.77 points, 0.7%, at 20,949.67, and the AIM All-Share declined 0.38 of a point, 0.1%, at 737.20
The Cboe UK 100 ended down slightly at 876.70, the Cboe UK 250 closed 0.6% lower at 18,342.56, and the Cboe Small Companies climbed 1.9% at 16,549.86.
Figures on Wednesday showed the pace of annual consumer price inflation accelerated to 3.5% in April, from 2.6% in March, topping the FXStreet cited consensus of 3.3%.
The last time the rate of inflation was higher was back in January 2024, when it stood at 4.0%.
The Office for National Statistics said the on-year consumer price inflation surge was driven by "housing and household services, transport, and recreation and culture".
Service price inflation picked up to 5.4% in April, from 4.7% in March, ahead of 4.8% consensus.
Goldman Sachs said the services inflation surprise was driven by larger increases in vehicle excise duty and airfares than anticipated, as well as strength in package holidays.
But it noted the BoE's measure of underlying services inflation excluding indexed and volatile components, rents and foreign holidays – which excludes vehicle duties, airfares, and package holidays – decelerated on a year-on-year basis.
Excluding energy, food, alcohol and tobacco, the annual core consumer price inflation rate was 3.8% in April, quickening from 3.4% in March, and topping 3.6% consensus.
"A triple whammy of higher regulated prices - including energy and water, an increase in employer National Insurance, as well as a rise in the minimum wage, contributed to an outsized jump in UK inflation in April," observed Peel Hunt's Kallum Pickering.
Deutsche Bank's Sanjay Raja said the print will almost certainly be the "death knell for a June rate cut."
A rate reduction in August is seen as finely balanced.
Kathleen Brooks at XTB noted expectations of a rate cut in August are back at 50%, down from 58% on Tuesday.
In response, the pound was quoted higher at USD1.3443 late on Wednesday in London, compared to USD1.3363 at the equities close on Tuesday.
It hit an intra-day high of USD1.3468, its best level since February 2022.
The euro firmed to USD1.1389 against USD1.1258. Against the yen, the dollar was trading down at JPY143.63 compared to JPY144.62.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt climbed 0.4%.
In New York on Wednesday, stocks were mixed. At the time of the London close, the Dow Jones Industrial Average was down 0.8%, the S&P 500 was down 0.2% and the Nasdaq Composite was up 0.3%.
The yield on the US 10-year Treasury was quoted at 4.54%, widening from 4.48% on Tuesday. The yield on the US 30-year Treasury was quoted at 5.02%, widening from 4.97%.
On London's FTSE 100, gold miners Fresnillo and Endeavour Mining were prominent risers, up 4.2% and 2.9% respectively after the price of gold rose.
Gold was higher at USD3,312.03 an ounce against USD3,276.82 on Tuesday.
Babcock International Group rose 3.6% after a well-received presentation focused on its Cavendish Nuclear business and a bullish share price target from JPMorgan.
Berenberg said the teach-in on Tuesday was "informative" and reaffirmed "our positive view" on the shares ahead of the company’s financial 2025 results on June 25.
It said Cavendish is an "often-overlooked part of the investment case", representing 7% of group revenue.
JPMorgan took the opportunity to increase its December 2026 share price target for Babcock to 1,100 pence from 1,000p and reiterate an 'overweight' rating.
Along with the "upbeat" teach-in on the Cavendish nuclear business, JPM thinks the next five years look "very exciting" for the company.
"Babcock remains one of the cheapest European defence stocks in our coverage," JPM added.
Marks & Spencer shrugged off early weakness to close 2.7% higher despite detailing the cost of the ongoing cyber attack.
M&S said the cyber attack could reduce operating profit by around GBP300 million in the current financial year.
The incident, which occurred around Easter, caused major disruption to its online operations and food logistics, leading to reduced availability, higher costs and suspended orders.
Dan Coatsworth at AJ Bell said the incident has "knocked the business for six" with the expected hit reflecting the severity of the situation.
But Chief Executive Stuart Machin called the incident a "bump in the road," arguing M&S will "come out of this in better shape."
But Peel Hunt said it is "nervous" that customers will have their long-term habits changed.
"M&S was on fire before the attack but we fear momentum will take longer than the company does to return. We love what management has done and it is with a heavy heart that we downgrade to 'hold' and cut our target price to 360p."
JD Sports endured a torrid trading session as shares fell 11% after first quarter trading fell short of City expectations.
The sports retailer delivered in-line annual results but said like-for-like sales were down 2.0% in the 13 weeks to May 3, below Visible Alpha consensus of minus 1.1%.
Comparable sales in North America were down 5.5% in the period, offsetting modest growth in the UK and Europe. Sales were 5.5% lower in Asia-Pacific LFL.
Shore Capital analyst David Hughes said US weakness remains a concern.
"With the impact of tariffs on prices, US consumer confidence and the US economy all still uncertain and with the high exposure the American business has to Nike we expect this to remain a point of weakness in financial 2026."
Phoenix Group firmed 3.0% after Citi upgraded to 'buy' from 'neutral'.
Analyst James Shuck thinks the outlook for the insurance and pensions provider is "bright" while a dividend yield of 9% seems "very well supported."
Brent oil was quoted at USD65.08 a barrel in London on Wednesday, little changed from USD65.09 late Tuesday.
On the FTSE 250, trading updates boosted Zigup, up 4.1%, but held back Close Brothers, down 3.5%, and RS Group, down 5.3%.
Thursday's global economic calendar has a slew of composite PMI readings, Canadian PPI figures, the Ifo business climate report in Germany, UK public sector borrowing numbers and a US weekly initial jobless claims print.
The domestic corporate calendar on Thursday has full-year results from property company British Land, telecommunications firm BT, and half-year results from budget airline easyJet.
By Jeremy Cutler, Alliance News reporter
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