Proactive Investors -
- FTSE 100 down 19 points
- L&G sells housebuilding business
- Core inflation ticks higher
Stocks open lower
Stocks opened in the red today, with the FTSE 100 dipping 17 points to 8,293 in opening trades.
Some of the biggest fallers include Rentokil Initial PLC (LON:RTO) (down 1.8%), Burberry Group PLC (LON:BRBY) (down 1.5%) and Legal & General Group PLC (LON:LGEN) (down 1.3%).
The latter comes after the insurer’s announcement that it is selling its CALA housebuilding subsidiary.
FTSE 100 risers include Reckitt Benckiser (LON:RKT) (up 2.3%) and Holiday Inn-owner InterContinental (LON:IHG) (up 1%).
UK core inflation ticks higher
The UK's annual inflation rate held steady at 2.2% in August 2024, the same as in July, according to the latest data from the Office for National Statistics.
The largest contributors to the rise came from airfares, which saw an increase of 11.9%, primarily on European routes. Other upward pressures included recreation and culture, which rose 4%, and transport, driven by a slower decline in second-hand car prices.
Month-on-month, the consumer price index (CPI) rose by 0.3%, reversing the 0.2% decline seen in July.
Core inflation, which excludes volatile items like food and energy, remained elevated, rising to 3.6% from 3.3% in the previous month.
This persistent core inflation has sparked debate over the direction of interest rates in the coming months.
Myron Jobson, Senior Personal Finance Analyst at interactive investor, stated: “The fact that core inflation, which strips out volatile food and energy prices, remains elevated, ticking higher in August, probably shores up the argument that Bank of England policymakers are likely to hold interest rates tomorrow, as it awaits a major economic puzzle piece to justify a further reduction to the base rate.”
According to Tom Stevenson, investment director at Fidelity International: “The mixed messages in today’s inflation data underline the challenge the Bank of England faces in setting monetary policy in a less stable and predictable environment for prices.
“With the new Labour government pushing for higher growth and productivity, and without the stabilising forces of globalisation, cheap energy and EU membership, inflation is likely to be more volatile in future.”
“A victory lap on the inflation-fighting front would be extremely premature," stated George Lagarias, chief economist at Forvis Mazars, who contended that a November cut is on the cards.
Legal & General confirms sale of CALA Homes
Legal & General Group PLC has announced the sale of its UK housebuilding subsidiary CALA Group after months of speculation.
L&G will sell CALA for an enterprise value of £1.35 billion to an entity controlled by investment firms Sixth Street Partners and Patron Capital.
Speculation over the sale of the company first emerged in March, when it was suggested CALA could be sold for £1 billion.
“A potential sale would not be a surprise”, given L&G’s attempts to streamline the company, analysts said at the time.
Commenting on the announcement today, L&G’s chief executive António Simões said: "This transaction demonstrates continued momentum in executing our strategy, simplifying our portfolio to enable a sharper focus on our core, synergistic businesses.
“Cala has been an important part of L&G for over a decade, with profits increasing tenfold since our initial investment in 2013.
“The sale announced today will provide capital to deliver our strategic goals of sustainable growth alongside enhanced returns for shareholders.”
Kevin Whitaker, chief executive of CALA, added: "Today's announcement is excellent news for Cala.
“The acquisition by Sixth Street Partners and Patron Capital demonstrates confidence in Cala's business plan and growth potential, as our talented team continues to build high-quality, sustainable new homes throughout the UK.”
The deal is expected to close by the end of the year.
Stocks to dip
FTSE 100 futures have the blue-chip index dipping 17 points to 8,302 following the opening bell this morning.
This follows a strong Tuesday session when the index closed 31 points higher.
Kicking off a big day on the macroeconomic front, yearly UK inflation came in at 2.2%, squarely hitting the market forecasts.
Core inflation, which strips out the food and energy sectors, came in slightly hot at 3.6% against the 3.5% forecast, while the retail price index also came in slightly hot.
This may have tempered expectations on an interest rate cut tomorrow, which is likely to weigh on stocks.
Eurozone inflation is due shortly, following by a high-stakes interest rate call from hr US Federal Reserve in the afternoon.