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17 Feb 2021 | 16:29

London close: Stocks finish weaker after surprise jump in inflation

(Sharecast News) - London stocks closed in the red on Wednesday, as investors mulled an unexpected uptick in UK inflation. The FTSE 100 ended the session down 0.56% at 6,710.90, and the FTSE 250 was 1.25% lower at 21,149.49.

Sterling was in a mixed state, last falling 0.4% against the dollar to trade at $1.3847, while gaining 0.14% on the euro to €1.1500.

"A rise in US government bond yields this week has worried traders a little and that is behind the negative move in stocks," said CMC Markets analyst David Madden.

"Equity markets have enjoyed a very positive run lately thanks to hopes that coronavirus-restrictions will be loosened in the months ahead, which should bring about higher economic activity."

Madden said the prospect of a $1.9trn stimulus package was also a factor in the recent rally.

"Yesterday there was a sharp move higher in the US 10-year yield and even though it has cooled a little today, it is still on dealers' minds.

"Rising yields have sent a mild tremor through the markets as it might be a warning that a rise in inflation is in the pipeline, which could pose a problem for central banks as they have no desire to increase interest rates anytime soon.

"The possibility of higher interest rates seems extremely low but nonetheless, stocks are under a little pressure today."

Data released earlier by the Office for National Statistics showed that consumer price inflation rose to 0.7% in January from 0.6% in December, with food and household goods the main drivers.

Analysts had been expecting a nudge lower to 0.5%.

Core inflation - which strips out volatile food and energy prices - held steady at 1.4%, versus consensus expectations of 1.3%.

"Inflation rose slightly in January, with food prices increasing," said ONS deputy national statistician for economic statistics, Jonathan Athow.

"Household goods also pushed up prices with less discounting this year on items such as bedding and settees.

"However, there were widespread January sales, with particular price cuts for clothing and footwear."

IG market analyst Joshua Mahony said market sentiment was still underpinned by vaccination, reopening, and stimulus expectations, yet there was an element of fear creeping in as inflation expectations impacted the potential monetary policy outlook.

"Inflation concerns are starting to rear their head ahead of a year that is expected to bring economic growth and importantly prices roaring back to life.

"The pandemic has notably had deflationary effects on a global scale, with rock-bottom energy prices providing the bedrock to a consumption driven decline in prices.

"However, with crude oil hitting a one-year high today, it is clear that transportation costs are on the rise even ahead of the grand reopening process expected in the second-quarter."

In equity markets, Hargreaves Lansdown closed down 7.04% after Peter Hargreaves sold £300m of shares, leaving him owning less than 20% of the company he co-founded 30 years ago.

British American Tobacco was in the red by 3.95% as it said full-year profits rose but the figure fell short of analysts' expectations.

Rio Tinto reversed earlier gains to finish 0.3% weaker, even after it delivered a record dividend to shareholders as soaring iron ore prices last and demand from China drove full-year profits sharply higher.

Ferrexpo lost 0.35% after an initiation at 'buy' at Peel Hunt, while on the upside, Shaftesbury rose 3.54% and Workspace added 2.9% after upgrades to 'buy' at Jefferies.

Johnson Matthey was lifted 0.56% by an upgrade to 'reduce' at AlphaValue.

Market Movers

FTSE 100 (UKX) 6,710.90 -0.56% FTSE 250 (MCX) 21,149.49 -1.25% techMARK (TASX) 4,134.90 -0.47%

FTSE 100 - Risers

Antofagasta (ANTO) 1,714.50p 4.80% Rolls-Royce Holdings (RR.) 102.30p 2.36% Hikma Pharmaceuticals (HIK) 2,386.00p 2.14% National Grid (NG.) 864.60p 1.89% B&M European Value Retail S.A. (DI) (BME) 601.00p 1.86% Standard Chartered (STAN) 497.50p 1.86% BT Group (BT.A) 129.85p 1.37% AstraZeneca (AZN) 7,424.00p 1.23% HSBC Holdings (HSBA) 432.25p 1.05% SSE (SSE) 1,431.00p 0.88%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 1,546.00p -6.47% M&G (MNG) 187.30p -5.07% British American Tobacco (BATS) 2,644.50p -3.78% Polymetal International (POLY) 1,551.00p -3.60% Avast (AVST) 489.80p -3.49% Taylor Wimpey (TW.) 160.55p -3.05% Fresnillo (FRES) 974.00p -3.04% St James's Place (STJ) 1,209.50p -2.89% Auto Trader Group (AUTO) 592.80p -2.82% Smurfit Kappa Group (SKG) 3,628.00p -2.68%

FTSE 250 - Risers

Indivior (INDV) 148.50p 4.50% TP ICAP (TCAP) 211.20p 3.73% Shaftesbury (SHB) 614.50p 3.54% Capital & Counties Properties (CAPC) 168.40p 3.00% Workspace Group (WKP) 743.00p 2.70% Carnival (CCL) 1,398.00p 2.27% Computacenter (CCC) 2,282.00p 2.06% Plus500 Ltd (DI) (PLUS) 1,407.00p 2.03% Vietnam Enterprise Investments (DI) (VEIL) 619.00p 1.98% VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 438.50p 1.98%

FTSE 250 - Fallers

Morgan Advanced Materials (MGAM) 307.00p -5.25% Lancashire Holdings Limited (LRE) 647.50p -5.06% Investec (INVP) 205.30p -4.42% Ibstock (IBST) 215.60p -4.18% Hammerson (HMSO) 21.90p -4.16% Ninety One (N91) 224.20p -4.11% Beazley (BEZ) 347.00p -4.09% Trainline (TRN) 478.40p -4.01% Bellway (BWY) 2,922.00p -3.94% Cineworld Group (CINE) 80.10p -3.93%
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