At 0830 BST, the FTSE 100 was flat at 6,938.12, while the pound was 0.5% lower versus the dollar at 1.1268 after figures from the Office for National Statistics showed that higher food prices helped push up inflation to a record 10.1% last month.
The consumer price index rose by 10.1% in the 12 months to September, compared to August’s rate of 9.9%. The figure was largely in line with expectations. On a monthly basis, CPI rose by 0.5% in September, compared to 0.3% in September 2021.
The ONS said that rising food prices made the largest upward contribution to the change in both CPIH and CPI. The largest downward pressure was transport, as the price of motor fuels and second-hand cars continued to fall.
Inflation has been mounting throughout the year, hitting a 40-year high of 10.1% in July before easing slightly to 9.9%.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: "Despite attempts to turn down the heat, the cauldron of hot prices continues to bubble, spitting out yet more problems the UK government has to grapple with amid the ongoing political turmoil.
"Scorching grocery prices are the big driver of the UK’s headline rate of inflation, which has jumped back into double digits, returning to July’s high. But with many consumers, households and businesses already feeling the burn of higher borrowing costs, a cold shock is set to be incoming. As they ramp down non-essential spending it is set to freeze off growth in the economy which should help bring down inflation as demand for goods and services lowers.
"With Trussenomics tax cuts reduced to a pile of dying embers, they no longer risk re-igniting the inflationary flames. This means that although the Bank of England is still expected to raise rates at the next meeting by 0.75%, investors are now banking on policymakers not going so hard and so fast with hikes, particularly next year. That’s partly why the pound dipped below $1.13 even though prices, on the face of it, still appear so hot to handle."
In equity markets, banks were under the cosh following a report that Chancellor Jeremy Hunt is preparing to raid their profits as well as those of energy companies as he looks to fill a £40bn fiscal hole.
Lloyds, NatWest (LON:NWG) and Barclays (LON:BARC) were among the worst performers on the FTSE 100. NatWest and Lloyds were also likely weighed down by rating downgrades at KBW.
Moneysupermarket (LON:MONY) shares tanked after Amazon (NASDAQ:AMZN) said it was launching a UK insurance comparison website.
Payments processor Network International rallied after it reiterated its full-year guidance and posted a 28% jump in third-quarter revenue.
Market Movers
FTSE 100 (UKX) 6,938.12 0.02%
FTSE 250 (MCX) 17,470.02 -0.34%
techMARK (TASX) 4,160.93 0.08%
FTSE 100 - Risers
BAE Systems (LON:BAES) (BA.) 814.60p 1.98%
F&C Investment Trust (FCIT) 885.00p 1.61%
BP (LON:BP.) 451.40p 1.38%
Frasers Group (FRAS) 662.00p 1.30%
International Consolidated Airlines Group (LON:ICAG) SA (CDI) (IAG) 117.34p 1.28%
Harbour Energy (HBR) 387.70p 1.07%
Scottish Mortgage Inv Trust (SMT) 745.80p 0.97%
GSK (GSK) 1,374.80p 0.81%
Haleon (HLN) 270.85p 0.76%
Rolls-Royce Holdings (LON:RR.) 74.78p 0.67%
FTSE 100 - Fallers
Lloyds Banking Group (LON:LLOY) 41.06p -3.63%
NATWEST GROUP (NWG) 229.50p -3.04%
Coca-Cola (NYSE:KO) HBC AG (CDI) (CCH) 1,901.50p -2.74%
Barclays (BARC) 143.82p -2.49%
Ocado Group (LON:OCDO) 468.30p -2.46%
Hargreaves Lansdown (HL.) 781.20p -2.23%
Intermediate Capital Group (LON:ICP) 987.80p -2.20%
Flutter Entertainment (CDI) (FLTR) 10,710.00p -1.88%
Dechra Pharmaceuticals (LON:DPH) 2,670.00p -1.62%
Antofagasta (LON:ANTO) 1,091.50p -1.53%
FTSE 250 - Risers
Network International Holdings (NETW) 322.60p 2.94%
RHI Magnesita N.V. (DI) (RHIM) 1,662.00p 2.59%
Telecom Plus (LON:TEP) 2,095.00p 2.20%
BlackRock (NYSE:BLK) World Mining Trust (BRWM) 582.00p 1.93%
International Distributions Services (IDS) 200.20p 1.81%
Chemring Group (CHG) 309.00p 1.64%
TUI (LON:TUIT) AG Reg Shs (DI) (TUI) 126.65p 1.56%
Spirent Communications (LON:SPT) 260.00p 1.01%
Monks Inv Trust (MNKS) 973.50p 0.99%
Bankers Inv Trust (BNKR) 97.50p 0.93%
FTSE 250 - Fallers
Moneysupermarket.com Group (MONY) 193.20p -7.65%
OSB Group (OSB) 388.80p -4.47%
Hilton Food Group (HFG) 629.00p -4.12%
Virgin Money (LON:VM) UK (VMUK) 128.05p -4.05%
Wetherspoon (J.D.) (JDW) 437.40p -3.32%
Liontrust Asset Management (LIO) 799.00p -3.03%
Currys (CURY) 64.15p -2.28%
Mitchells & Butlers (MAB) 111.00p -2.20%
Hays (LON:HAYS) (HAS) 108.80p -2.16%
Future (FUTR) 1,314.00p -2.09%