UK stocks experienced a downturn on Wednesday, influenced by unexpected consumer inflation figures that heightened concerns over potential further tightening of monetary policy by the Bank of England (BoE).
Additionally, homebuilder stocks faced uncertainty due to Barratt Developments’ cautious outlook.
The FTSE 100 saw a slight 0.2% decline, while the mid-cap FTSE 250 dropped by 0.8% as of 0822 GMT. This marked the end of a two-day winning streak for both indexes.
In September, the data revealed that the annual consumer price inflation in the UK remained at an 18-month low of 6.7%, with core inflation dropping less than anticipated.
This raised concerns about the possibility of another interest rate hike by the BoE.
The increase in fuel prices from August to September played a role in driving up the annual Consumer Price Index (CPI) rate.
Danni Hewson, the head of financial analysis at AJ Bell, commented, “Fuel prices are sort of one of the building blocks of inflation because it has an impact on the cost of deliveries too.”
Following the release of the inflation data, British government bond prices declined, while the value of the sterling ticked higher.
Among the sectors, homebuilders (FTNMX402020) experienced the sharpest decline, falling by 2.8%.
This drop was primarily attributed to Barratt Developments (BDEV.L) refraining from offering a full-year profit forecast due to the “uncertain” outlook, causing the stock to fall by 2.9%.
Hewson explained, “There is still demand for houses but mortgages are so expensive that it is creating uncertainty and making the outlook very difficult to get a clear picture of.”
On the other hand, precious metal miners (FTNMX551030) saw a modest gain of 0.3% as precious metals were sought after as safe-haven assets amid concerns about regional conflicts, particularly in light of a deadly blast in Gaza.
The oil and gas sector (FTNMX601010) also advanced by 0.5% due to increasing worries about potential disruptions in the oil supply from the Middle East following an escalation of turmoil in the region.
Finally, Whitbread (WTB.L) shares stood out with a 3.8% surge, propelling them to the top of the FTSE 100.
This rise came after the hotelier announced a share buyback plan worth £300 million ($366.2 million), following a remarkable 44% increase in half-yearly profit.