20th Aug 2025 08:53
(Alliance News) - Stock prices in London opened lower on Wednesday, following hotter-than-expected consumer inflation data which supported expectations that Bank of England will not cut rates in November.
The consumer price index for July rose 3.8% on-year, exceeding consensus expectations of a 3.7% increase. On a monthly basis, CPI rose 0.1%, defying the consensus forecast of a 0.1% decrease.
"Core prices meanwhile edged up to 3.8% [on-year] while services bounced to 5.0% from 4.7%, disappointing the markets 4.8% guess," Lloyds commented. "While that beat analysts' assumptions, it is really not far from what the BoE's latest MPR forecasts had pencilled in for the month, 3.8% for headline and 4.9% y/y. Moreover...the market had already pared back its expectations for further cuts as a consequence. On that basis a negative market reaction to the print should be contained."
Meanwhile, Swissquote's Ipek Ozkardeskaya commented: "Stronger-than-expected CPI numbers further reduce the chances of seeing the [BoE] cut rates in November."
The FTSE 100 index opened down 15.76 points,0.2%, at 9,173.46. The FTSE 250 was down 74.31 points, 0.3%, at 21,758.95, and the AIM All-Share was down 2.48 points, 0.3%, at 760.74.
The Cboe UK 100 was down 0.3% at 919.17, the Cboe UK 250 was down 0.4% at 19,121.64, and the Cboe Small Companies was marginally lower at 17,135.75.
On the FTSE 250, OSB was down 1.1%.
The Kent-based bank announced a 20% pretax profit fall to GBP192.3 million in the six months to June 30 from GBP241.3 million a year ago.
Profit was hit by lower net interest income, a net fair value loss on financial instruments compared to a gain in the prior period, an impairment charge compared to an impairment credit in the prior period, and higher administrative expenses.
Net interest income declined 4.7% to GBP337.0 million from GBP353.5 million with total income down 10% to GBP325.8 million from GBP362.6 million.
OSB reported a net fair value loss on financial instruments, mainly unmatched swaps, of GBP14.3 million, compared to gain of GBP5.9 million a year ago.
Net interest margin narrowed to 230 basis points from 237 bps a year ago.
In European equities on Wednesday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.8%.
German producer price deflation unexpectedly accelerated in July, the Federal Statistical Office reported.
The producer price index fell 1.5% in July from a year before, compared to a 1.3% decline in June and sharper than the FXStreet-cited consensus, which had expected a continued deflation rate of 1.3%. Notably, the annual fall in energy prices accelerated to 6.8% in July from 6.4%.
On a monthly basis, German producer prices were down 0.1% in July, after an increase of 0.1% in June from May. This was against the market consensus of another 0.1% increase.
In Paris, Airbus was down 1.3%.
UK workers at the aircraft manufacturer are to stage a series of strikes in a dispute over pay.
Unite said around 3,000 of its members will walk out for 10 days in September after they voted overwhelmingly in favour of industrial action. It warned that the strikes will hit production of wings for Airbus's commercial and military aircraft programmes.
The pound was quoted slightly lower at USD1.3498 early on Wednesday in London, compared to USD1.3503 at the equities close on Tuesday. The euro stood lower at USD1.1643, against USD1.1669. Against the yen, the dollar was trading lower at JPY147.56 compared to JPY147.75.
In Asia on Wednesday, the Nikkei 225 index in Tokyo was down 1.5%. In China, the Shanghai Composite was up 1.1%, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Sydney closed up 0.3%.
In the US on Tuesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average up 10.45 points, the S&P 500 down 0.6% and the Nasdaq Composite down 1.5%.
"A selloff across US Big Tech names dampened market mood yesterday, triggered largely by mounting doubts over the AI boom," Ozkardeskaya commented. "An MIT report revealed that 95% of companies investing in generative AI have yet to see returns, while OpenAI CEO Sam Altman himself warned that some sector valuations were "insane". The comments may have been a wake-up call for investors, sparking a sharp pullback in high-flying names [including Palantir, Nvidia and Arm]."
She continued: "Caution is also mounting ahead of Federal Reserve Chair Jerome Powell's speech at Jackson Hole on Friday. Market bets for a September rate cut have surged since investor Scott Bessent floated the idea of a 50bp move...Powell now faces pressure from the government to cut rates amid a softening labour market, but also the risk of fuelling stagflation if inflation re-accelerates."
The yield on the US 10-year Treasury was quoted at 4.32%, widening from 4.31%. The yield on the US 30-year Treasury was quoted at 4.92%, widening from 4.91%.
"The US 2-year yield remains near 3.75%, with expectations centering on a 25bp cut in September and another before year-end — provided inflation doesn't spike," Ozkardeskaya noted. "Any hawkish adjustment in Powell's tone could lift yields, extend the US dollar's recovery, and accelerate the equity selloff."
Brent oil was quoted higher at USD66.42 a barrel early in London on Wednesday, from USD66.08 late Tuesday.
Gold was quoted at USD3,324.90 an ounce, down a notch against USD3,325.33.
Still to come the economic calendar, the eurozone's CPI print is out later on Wednesday morning.
By Emma Curzon, Alliance News reporter
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