London close: Stocks turn weaker as US wholesale prices dip

(Sharecast News) - London stocks ended lower on Wednesday as investors weighed fresh US inflation data and a weak update from Primark owner Associated British Foods.

The FTSE 100 slipped 0.19% to close at 9,225.39, while the more domestically focused FTSE 250 retreated 0.29% to 21,534.10.

"Britain's blue-chip index relinquished early gains to slip into negative territory on Wednesday, initially buoyed by heavyweight banking and healthcare stocks, as investors digested a wave of corporate earnings," noted Patrick Munnelly, market strategy partner at TickMill.

"Heightened concerns over global trade dynamics have introduced a cautious tone, dampening bullish sentiment."

Sterling made modest gains, rising 0.11% against the dollar to last trade at $1.3543, and firming 0.13% on the euro to change hands at �1.1568.

Wholesale inflation unexpectedly eases stateside

In economic news, US wholesale inflation unexpectedly eased in August, offering potential relief for the Federal Reserve ahead of its policy meeting next week.

Data from the Bureau of Labor Statistics showed producer prices fell 0.1% month-on-month, defying expectations for a 0.3% rise and reversing July's 0.7% gain.

On an annual basis, headline PPI slowed to 2.6%, while core PPI climbed 0.3% on the month and 2.8% year-on-year, its fastest pace since March.

The drop was largely driven by weaker services prices, offsetting modest gains in goods.

The figures arrived on the eve of the latest US consumer price index release, which was expected to show headline inflation rising to 2.9%.

Together, the data are seen as key inputs for the Fed's September decision, with markets continuing to price in the possibility of rate cuts.

Lower borrowing costs meanwhile spurred a sharp rebound in US mortgage demand.

Applications rose 9.2% in the week to 5 September, according to the Mortgage Bankers Association, as benchmark mortgage rates fell to their lowest in nearly a year.

Refinancing activity jumped 12.2%, while home purchase applications advanced 6.6%, fully reversing three weeks of declines.

The move followed a drop in Treasury yields, driven by weak labour market data.

Geopolitical tensions also came into focus after US president Donald Trump urged the European Union to join Washington in imposing tariffs of up to 100% on China and India to pressure Russia over its war in Ukraine.

"Recent reports reveal that US president Trump has been advocating for substantial tariff hikes, urging the European Union to consider imposing tariffs as steep as 100% on imports from China and India," Munnelly highlighted.

"These measures would specifically target Russian oil imports, a contentious issue amid ongoing sanctions and trade disputes."

Reports from the Financial Times and BBC said Trump told European officials that "the obvious approach here is, let's all put on dramatic tariffs and keep the tariffs on until the Chinese agree to stop buying the oil".

The demand highlighted Washington's frustration that Moscow has maintained energy exports to non-Western buyers despite sanctions.

While Trump had pledged to end the conflict swiftly if re-elected, US efforts to broker a resolution had so far faltered as Russia intensified drone attacks on Ukraine.

In Asia, Chinese inflation data pointed to weak domestic demand.

Consumer prices fell 0.4% year-on-year in August, the steepest decline in six months and sharper than the 0.2% drop expected.

Food costs slumped 4.3%, their fastest fall in nearly four years, offsetting gains in clothing, healthcare and education.

Core inflation edged up to 0.9%, the highest in 18 months, while producer prices fell 2.9% from a year earlier, marking a 35th straight month of wholesale deflation.

Chrysalis jumps on Klarna IPO, AB Foods in the red

On London's equity markets, Chrysalis Investments was a standout performer, surging 8.31% after confirming it had retained its 4.2 million shares in Klarna following the payments group's long-anticipated US initial public offering.

Klarna raised $1.37bn by selling shares at $40 each, above the marketed range, giving the Swedish fintech a valuation of just over $15bn.

Chrysalis said it believed Klarna was "well-positioned to benefit from attractive growth prospects over the medium-term," though its stake is subject to a six-month lock-up.

Haleon also advanced, climbing 1.36% after Goldman Sachs upgraded the stock to 'buy' from 'neutral' and raised its price target to 440p.

The broker argued that the company's fundamentals "remain intact" despite recent headwinds, calling the 9% share price decline since May "a buying opportunity".

DCC added 0.86% after unveiling plans to return �600m to shareholders following the sale of its healthcare business.

Munnelly noted that "shares of DCC, a services provider, increased by 4.84% to 4,900p, making it the leading gainer on London's FTSE 100.

"DCC has finalised a shareholder returns plan worth 800 million pounds following the sale of its healthcare unit."

On the downside, Associated British Foods slumped 13.19% after a disappointing trading update.

Richard Hunter at Interactive Investor said the company was "finding the current environment heavy going," with its sugar division set to post a �40m annual loss compared with prior profit estimates of up to �75m.

AB Foods said it would close its Vivergo bioethanol plant and restructure its Spanish sugar business, incurring around �200m in impairments.

Hunter noted that while Twinings and Ovaltine had performed well, growth at Primark had stalled, with consumer caution weighing on prospects.

"Shares of AB Foods dropped 11.9%, reaching a four-month low of 1,974.5p," Munnelly observed.

"This marks the biggest intra-day decline since June 2016 and positions it as the top percentage loser on London's blue-chip index."

Other retailers also lost ground, with Marks & Spencer down 3.01% and Next off 1.81%.

Russ Mould at AJ Bell said: "The idea that value retailers will automatically thrive in a period where consumers are watching their pennies no longer stacks up.

"Cheap prices do not mean goods will fly off the shelf, just as Primark has found out."

Mould expanded that "sales have been poor in parts of Europe amid a weaker consumer environment.

"While there are green shoots in the UK, even its domestic territory isn't firing on all cylinders. It currently feels like a perfect storm for the retail sector and management must be adept at spinning multiple plates."

Vistry Group dropped 5.73% after reporting a 33% fall in interim earnings, though it maintained full-year guidance.

Airlines also struggled, with easyJet down 2.18% and Wizz Air off 2.59% as oil prices rose in response to escalating tensions in the Middle East after Israel bombed Qatar without warning.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 9,225.39 -0.19%

FTSE 250 (MCX) 21,534.10 -0.29%

techMARK (TASX) 5,454.72 -0.12%

FTSE 100 - Risers

Prudential (PRU) 1,027.00p 3.36%

BAE Systems (BA.) 1,832.00p 2.20%

HSBC Holdings (HSBA) 996.80p 1.82%

Fresnillo (FRES) 2,174.00p 1.78%

St James's Place (STJ) 1,253.00p 1.70%

Pershing Square Holdings Ltd NPV (PSH) 4,560.00p 1.69%

Centrica (CNA) 156.70p 1.65%

Anglo American (AAL) 2,531.00p 1.65%

Haleon (HLN) 365.00p 1.36%

Halma (HLMA) 3,296.00p 1.35%

FTSE 100 - Fallers

Associated British Foods (ABF) 1,945.50p -13.19%

Relx plc (REL) 3,337.00p -4.19%

International Consolidated Airlines Group SA (CDI) (IAG) 381.70p -4.07%

Auto Trader Group (AUTO) 788.20p -3.10%

Marks & Spencer Group (MKS) 342.10p -3.01%

3i Group (III) 3,811.00p -2.85%

Coca-Cola Europacific Partners (DI) (CCEP) 6,560.00p -2.53%

easyJet (EZJ) 461.10p -2.18%

Convatec Group (CTEC) 236.00p -1.83%

Next (NXT) 11,950.00p -1.81%

FTSE 250 - Risers

Chrysalis Investments Limited NPV (CHRY) 130.40p 8.31%

Oxford Nanopore Technologies (ONT) 174.30p 2.53%

Polar Capital Technology Trust (PCT) 412.50p 2.35%

Close Brothers Group (CBG) 478.60p 1.96%

Allianz Technology Trust (ATT) 477.50p 1.92%

W.A.G Payment Solutions (EWG) 109.50p 1.86%

Mitie Group (MTO) 142.60p 1.86%

Wetherspoon (J.D.) (JDW) 680.50p 1.72%

Great Portland Estates (GPE) 303.00p 1.68%

Bakkavor Group (BAKK) 220.50p 1.61%

FTSE 250 - Fallers

Vistry Group (VTY) 569.20p -5.73%

Computacenter (CCC) 2,320.00p -3.89%

Carnival (CCL) 2,077.00p -3.62%

Raspberry PI Holdings (RPI) 411.80p -3.33%

Dunelm Group (DNLM) 1,081.00p -3.22%

Kainos Group (KNOS) 894.50p -2.98%

Energean (ENOG) 894.50p -2.93%

Future (FUTR) 714.50p -2.86%

Barr (A.G.) (BAG) 690.00p -2.82%

Wizz Air Holdings (WIZZ) 1,280.00p -2.59%