London stocks experienced a slight decline on Wednesday as investors balanced the news of Britain’s headline inflation hitting the Bank of England’s (BoE) target against a slower-than-expected drop in services price inflation.
The blue-chip FTSE 100 fell by 0.1% to 8,180.42 points, while the mid-cap FTSE 250 remained flat at 20,410.28 points.
The pound saw a modest increase of 0.1% against the dollar, reaching $1.2728.
Investors were concerned with the slower-than-expected decrease in services price inflation for May, which the Bank of England considers a key indicator of medium-term inflation risks.
“Markets are seeing a bit of indigestion on the details of the inflation report pushing back expectations of a first rate cut,” remarked Ben Laidler, global markets strategist at eToro.
Data revealed that services price inflation was at 5.7%, higher than the 5.5% expected by economists in a Reuters poll.
This led investors to reduce the likelihood of an August rate cut, with the chance now estimated at roughly 30%, down from nearly 50% prior to the data release.
“If this stickiness in domestic price pressures continues, alongside ongoing resilience in economic activity, an August rate cut could well be off the table too,” commented Zara Nokes, global market analyst at J.P. Morgan Asset Management.
Meanwhile, headline inflation returned to the BoE’s target of 2%, ahead of the central bank’s policy decision expected on Thursday.
In individual stocks, Segro saw a 1.2% decline following a downgrade from Jefferies from “buy” to “hold.” Spectris fell by 8.2% after warning of lower-than-expected profits due to weak demand in China.
Helios Towers was the largest loser on the mid-cap index, dropping 8.4% after a discounted secondary share placement.
Conversely, Anglo American gained 1.5% after announcing a 30% expected decline at its key Chile copper mine in 2025.
Notably, U.S. markets were closed for a public holiday on Wednesday.