London pre-open: Stocks seen flat as inflation unexpectedly ticks higher

(Sharecast News) - London stocks were set for a steady open on Wednesday following a mixed session on Wall Street, as data showed that UK inflation unexpectedly ticked higher last month.

The FTSE 100 was called to open flat at 8,938.

Figures released earlier by the Office for National Statistics showed that annual inflation rose to 3.6% in June from 3.4% in May, versus expectations for it to remain unchanged.

The ONS said transport, particularly motor fuels, made the largest upward contribution.

Core inflation - which excludes food and energy costs increased to 3.7% from 3.5%.

ONS acting chief economist Richard Heys said: "Inflation ticked up in June driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year.

"Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year. However, it remains well below the peak seen in early 2023."

Martin Sartorius, principal economist at the Confederation of British Industry, said: "June's stronger-than-expected inflation print will raise concerns that recent price pressures - driven by higher household energy prices and the passthrough of increased employment costs - could potentially re-entrench inflation in the economy.

"While we still expect the Bank of England's Monetary Policy Committee to continue gradually cutting rates, today's upside inflation surprise means its August decision will be finely balanced. Underlying price pressures show signs of easing as the labour market cools, which should support a rate cut. However, some members of the MPC will be wary of loosening too quickly and, consequently, risk inflation remaining above target for longer."

In corporate news, Rio Tinto said copper production was now expected to be at the higher end of estimates after a 13% rise in output during the second quarter due to the successful ramp up of the Oyu Tolgoi underground mine and good performance at Escondida.

The Pilbara iron ore operation achieved its highest Q2 production since 2018, recovering from extreme weather in the previous three months, but Rio said it still expected shipments to be at the lower end of guidance.

Mining giant Antofagasta said that it had recorded increased production at its two largest copper mining districts, Los Pelambres and Centinela.

On a quarter-on-quarter basis, group-level copper production increased by 3% and net cash costs fell by 27%.