British stock indexes retreated on Wednesday, following a broadly in line inflation report and as investors awaited a highly anticipated yet uncertain Federal Reserve policy decision later in the day. At 0707 GMT, both the blue-chip and an index of midcap stocks were down 0.2%. UK annual consumer price inflation stood at 2.2% in August, unchanged from July as forecast, data showed. The British pound touched a session high against the dollar following the inflation data, pressuring the FTSE 100's export-focused companies.
The data points to still-persistent inflationary pressures, with traders further trimming bets on the BoE cutting rates at its Thursday meeting, where policymakers are expected to keep rates on hold. Globally, investors remain focused on the Federal Reserve, which is expected to ease policy later in the day.
Pricing for a larger-than-usual 50-basis-point rate cut has leapt to 61% from around 14% a week ago, as per CME's FedWatch tool, even as most major brokerages still forecast a 25-bp reduction. Reckitt Benckiser (LON:) rose 2% to the top of the FTSE 100 after a media report the company has launched early discussions with potential suitors for a sale of its homecare assets. Its gains boosted the personal care index 0.4%. An index tracking miners lost 0.8% as metal prices eased ahead of the Fed decision.
Analysis:
The British stock indexes faced a decline as investors awaited the Federal Reserve's policy decision amidst inflation concerns. The UK annual consumer price inflation stood at 2.2% in August, remaining unchanged from July, but services inflation rose to 5.6%, putting pressure on the FTSE 100's export-focused companies. Traders are cautious about the Bank of England cutting rates at its upcoming meeting, while globally, investors are focused on the Federal Reserve's expected policy easing. The potential for a larger rate cut has increased, with Reckitt Benckiser leading the FTSE 100 with discussions of a sale, impacting the personal care index positively. However, miners faced a decline as metal prices eased ahead of the Fed decision.