London stocks fall as UK annual inflation tops 10%

Signage is seen outside the entrance of the London Stock Exchange in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls
  • CPI up 10.1% in July vs est of 9.8% rise
  • Balfour Beatty tops FTSE 250 index
  • Cineworld plunges to record low
  • FTSE 100 falls 0.3%, FTSE 250 slides 1.5%

Aug 17 (Reuters) - London stocks fell on Wednesday, with the FTSE 100 index snapping a three-day winning streak after data showed British consumer price inflation jumped to 10.1% in July, raising bets about more aggressive interest rate hikes by the Bank of England.

The blue-chip index (.FTSE) ended 0.3% lower, dragged down by declines in insurers and bank stocks.

Persimmon (PSN.L) slid 7.8% after the housebuilder posted a fall in half-yearly profit. read more

Official figures showed consumer price inflation jumped to a higher-than-expected 10.1% in July, its highest since February 1982, and up from an annual rate of 9.4% in June as surging food costs intensified a squeeze on household budgets. read more

The data fuelled bets by investors that the Bank of England will keep on hiking interest rates quickly, with markets now pricing in an 85% chance of a half percentage-point rate interest hike in September.

"We now see risks tilted to an even more front-loaded and protracted hiking cycle with inflation expectations increasingly at risk of destabilising further in the coming months," Sanjay Raja, senior economist at Deutsche Bank wrote in a note.

"We see the peak in inflation delayed to next year with inflation likely to remain in double digits at least until late Q2-2023."

Still, the FTSE 100 has gained nearly 1.8%, outperforming Europe's STOXX 600 (.STOXX) and U.S. S&P 500 (.SPX) index, due to its exposure to commodity-linked stocks and global firms.

"We remain constructive on the UK market in a backdrop of high commodity prices, while many large-cap value and defensive names can perform well in the current macro environment," said Hussain Mehdi, investment strategist at HSBC Asset Management.

The domestically focused FTSE 250 midcap index (.FTMC) closed 1.5% lower, easing off two-month highs.

Infrastructure firm Balfour Beatty (BALF.L) jumped 10.5% after posting a 42% rise in underlying operating profit in the first half and announcing a hike in dividend.

Cineworld (CINE.L) plunged 60.4% to a record low after the world's second-largest cinema chain warned that admission levels at its theatres are likely to stay lower than expected until November due to limited film releases. read more

Reporting by Sruthi Shankar, Johann M Cherian and Aniruddha Ghosh in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty

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