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Written by Pranav Kashyap
(Reuters) – British stocks fell on Wednesday as investors juggled headline inflation in Britain that reached the Bank of England’s target against a slow decline in services price inflation.
The leading stock fell 0.1% to 8,180.42 points, while the average index settled at 20,410.28 points. The pound sterling gained 0.1 percent against the dollar, recording $1.2728 in recent transactions.
Investors faced a slower-than-expected decline in services inflation in May, which the Bank of England believes provides a clearer view of medium-term inflation risks.
“Markets are experiencing a bit of indigestion over the details of the inflation report, which has dampened expectations of a first rate cut,” said Ben Laidler, global markets strategist at eToro.
The data showed that service price inflation reached 5.7%, compared to a Reuters poll of economists who expected 5.5%.
Investors are now placing a roughly 30% chance of a rate cut in August, down from around 50% before the data was released.
“If this persistence in domestic price pressures continues, coupled with continued resilience in economic activity, a rate cut in August may also be off the table,” said Zara Knox, global market analyst at JP Morgan Asset Management.
Meanwhile, headline inflation returned to the Bank of England’s 2% target.
The central bank is expected to announce its policy decision on Thursday.
Among individual stocks, Segro lost 1.2% after Jefferies downgraded the stock to “hold” from “buy.”
Spectris stock fell 8.2% after the scientific instrument maker warned of lower-than-expected profits due to weak Chinese demand.
The stock of the communications infrastructure company Helios Towers was the biggest loser on the medium-capitalization index, as it fell by 8.4% after offering secondary shares at a discount.
Anglo American (JO:) stock rose 1.5% after the mining company said it expects a 30% decline at its main mine in Chile in 2025.
US markets are closed for a public holiday on Wednesday.
