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UK stocks close down after data dashes hopes of early rate cuts

Published 13/02/2024, 08:23
Updated 13/02/2024, 17:40
© Reuters. Signage for the London Stock Exchange Group is seen outside of offices in Canary Wharf in London, Britain, August 3, 2023. REUTERS/Toby Melville/File Photo

By Shristi Achar A and Sruthi Shankar

(Reuters) -The main UK stock indexes suffered sharp falls on Tuesday after hotter-than-expected U.S. inflation numbers and domestic wages data prompted investors to scale back expectations of early interest rate cuts this year.

The blue-chip FTSE 100 closed down 0.8%, its biggest one-day selloff in almost a month.

Britain's rate-sensitive homebuilders tumbled 4.0% and REITs fell 2.4%, leading losses among the FTSE 350 subsectors.

U.S. and European government bond yields surged after a report showed consumer inflation stayed elevated last month, smashing market expectations of imminent interest rate cuts by the Federal Reserve.

Data earlier showed British wage growth slowed by less than forecast in the three months to the end of 2023, pushing investors to price in the first quarter-point rate cut from the Bank of England no sooner than June. [0#BOEWATCH]

All eyes will be on the UK inflation numbers on Wednesday.

"The range of outcomes is wider than usual due to weight changes but tomorrow's number could end the recent run of downside surprises at say 4.1% versus 4%, mainly due to base effects," said Kevin Boscher, chief investment officer at Ravenscroft.

"Markets may be disappointed tomorrow but all components of inflation are declining rapidly and inflation could positively surprise markets and the MPC and be back at 2% by April/May."

The domestically focussed FTSE 250 dropped 1.5% to also post its worst day in nearly a month.

Among individual stocks, GSK (LON:GSK) added 0.9% after Citigroup upgraded the stock for the first time in seven years, on positive results from a study for its multiple myeloma drug, Blenrep.

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AstraZeneca (NASDAQ:AZN) rose 1.0% following four consecutive sessions of losses, providing a boost to the market.

London-listed shares of TUI (LON:TUIT) gave up early gains to close down 0.2% after Europe's largest travel operator swung to a profit in its first quarter.

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