London Stocks Fall on Inflation Data, Rate Cut Bets Trimmed

London stocks dropped on Wednesday after domestic inflation data exceeded expectations. The blue-chip FTSE 100 index fell by 0.1%, while the mid-cap FTSE 250 dipped 0.2%. Strong inflation numbers reduced the odds of an August rate cut by the Bank of England. Industrial metals miners and life insurers faced declines.

London stocks experienced a decline on Wednesday following stronger-than-anticipated domestic inflation data, leading investors to scale back expectations for an August interest rate cut by the Bank of England. The blue-chip FTSE 100 index dropped by 0.1% as of 0735 GMT, marking a third consecutive session of losses. The mid-cap FTSE 250 also slipped by 0.2%.

Data on British consumer prices revealed that inflation remained at 2%, contrary to forecasts predicting a slight decrease, thereby increasing uncertainty regarding the BoE's easing cycle. The likelihood of an August rate cut fell to 33% from a pre-data release figure of 49%.

Additionally, yields on the 2-year government bond rose, while the pound strengthened against the dollar, further impacting market sentiment. Julian Howard, chief multi-asset investment strategist at GAM Investments, commented, "Investors wanted to see a figure below target to give them some cushion, and (inflation) coming in at target remains unconvincing. To actually cut rates, the BoE needs that additional level of certainty. There were some elements of the report which were quite disappointing, like the service inflation aspect."

Industrial metals miners dragged the market with a 0.9% decline, particularly affected by Antofagasta's 3.8% drop following its forecast that full-year copper output would be at the lower end of its guidance range. However, losses were moderated by a 1.1% gain in the automobile and parts sector, which rebounded after three sessions of losses. Precious metal miners saw a 0.7% rise as gold prices hit a record high. Legal & General Group fell 1.5% after RBC downgraded its stock to "Sector perform" from "Outperform", pulling life insurers down by 0.8%. Genus dropped 5.2% to the bottom of the FTSE 250 after the animal genetics firm forecasted adjusted pre-tax profit in line with market views for 2024 and lower adjusted operating profit for 2025 compared to its earlier forecast.