London close: Stocks fall after rise in UK consumer inflation
By Josh White
Date: Wednesday 16 Jul 2025
(Sharecast News) - London equities slipped on Wednesday as stronger-than-expected UK inflation data offset a decline in US producer inflation, prompting investor caution over the interest rate outlook.
The FTSE 100 index edged down 0.13% to close at 8,926.55 points, while the FTSE 250 shed 0.41% to end the session at 21,601.86 points.
In currency markets, sterling was last up 0.28% on the dollar to trade at $1.3422, while it slipped 0.02% against the euro, changing hands at €1.1535.
"The spectre of inflation has returned to haunt markets after a period when investors' attention has largely been centred elsewhere," said AJ Bell investment analyst Dan Coatsworth.
"A higher-than-expected inflation reading in the US yesterday is one of the first data points to suggest tariffs are beginning to have some impact on prices.
"While this impact looks fairly modest for now, this reading obviously comes before the more onerous levies on imports which are currently lined up for introduction at the beginning of August."
Coatsworth noted that UK inflation increasing to an 18-month high in June thanks to higher fuel and food prices would reinforce concerns about inflationary pressures as the market weighed the potential impact on interest rates.
"The FTSE 100 was steady after beating a rapid retreat from the 9,000 mark yesterday afternoon.
"Wednesday saw miners Antofagasta and Rio Tinto higher on positive production numbers, while heavyweight stock AstraZeneca dragged on the index after a late-stage trial on an experimental treatment for a rare condition failed to meet its primary target.
"Factory gate price data out in the US later on will be closely monitored - when producers charge more for goods and services, this tends to get passed on to consumers down the line."
US producer price inflation slows, UK consumer inflation unexpectedly rises
In economic news, the US producer price index rose 2.3% year-on-year in June, down from a revised 2.7% in May and the lowest rate since September 2024, according to the Bureau of Labor Statistics.
The monthly reading was flat, defying expectations of a 0.2% increase, with a drop in services prices offsetting a 0.3% rise in goods.
Core PPI was unchanged on the month and slowed to 2.6% annually, below the 2.7% consensus.
The data followed a higher-than-expected consumer inflation report earlier in the week, which showed signs that recent tariff hikes are beginning to feed through to prices.
In the housing market, US mortgage applications fell 10% in the week to 11 July, the largest weekly drop in nearly three months, as rising interest rates dampened demand.
Refinance activity dropped 12%, while purchase applications declined 7%, according to the Mortgage Bankers Association.
On home shores, UK inflation rose unexpectedly in June, adding pressure on the Bank of England.
The consumer prices index climbed to 3.6% annually, up from 3.4% in May and above forecasts.
Core inflation rose to 3.7%, while services inflation ticked up to 4.7%.
The largest upward contributions came from transport, particularly air fares, which rose 7.9% month-on-month.
Food inflation accelerated to 4.5%, marking a third consecutive monthly increase.
"Headline inflation is expected to edge up over the next few months and peak in September," said Matt Swannell, chief economic adviser to the EY Item Club.
"Following this, support from the energy category should fade, putting downward pressure on the headline rate over the remaining months of this year and into 2026.
"However, the fall in inflation is likely to be gradual, reflecting ongoing stickiness in the services category."
The higher inflation figures came as the UK housing market showed tentative signs of recovery.
According to the Office for National Statistics, annual house price growth rose to 3.9% in May, up from 3.6% in April.
Average house prices stood at £269,000, with the strongest growth seen in Scotland and Wales.
Rental inflation remained elevated at 6.7% in June, though slightly down from 7.0% in May.
On the continent, the eurozone's trade surplus widened more than expected in May to €16.2bn, rebounding from April's €11.1bn amid continued volatility linked to US tariff policy.
Exports rose modestly by 0.9%, while imports fell 0.6%, with gains concentrated in chemicals and machinery.
The eurozone's cumulative trade surplus for the first five months of 2025 rose to €86.5bn.
On the trade front, US president Donald Trump warned that tariffs on pharmaceutical imports and semiconductors could be implemented by the end of July.
He said drug makers would face escalating tariffs, starting low and rising after a transition period, while levies on semiconductors could be imposed more swiftly.
Intermediate Capital in the green, AstraZeneca slips
On London's equity markets, Intermediate Capital Group rose 3.39% after reporting a 3% increase in total assets under management in the first quarter to $123bn.
Fee-earning AuM climbed 4% to $82bn, bolstering investor confidence.
Hiscox advanced 2.58% following an upgrade to 'overweight' from Morgan Stanley, while Bytes Technology Group gained 2.12% after Jefferies raised its rating to 'buy', citing improved risk-reward prospects.
Rio Tinto added 1.21% after revealing that US tariffs on Canadian aluminium added $300m in first-half costs.
The company said these were partially offset by higher premiums earlier in the year, but those premiums have since narrowed.
Rio also lifted its annual copper output guidance to the upper end of its range after a 13% increase in second-quarter production.
Bloomsbury Publishing gained 6.16% after confirming that full-year results remain on track, buoyed by continued strong demand for titles from authors such as Sarah J. Maas and J.K. Rowling.
On the downside, AstraZeneca slipped 0.57% after its late-stage trial for an amyloidosis treatment failed to meet statistical significance.
Hays declined 1.49% after a downgrade to 'underweight' from Morgan Stanley, and ConvaTec Group fell 1.23% following further concerns over proposed cuts by US Medicare to reimbursements for wound care products.
The company warned the changes could reduce annual revenue by 1% to 2% from 2026.
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 8,926.55 -0.13%
FTSE 250 (MCX) 21,601.86 -0.41%
techMARK (TASX) 5,145.56 -0.34%
FTSE 100 - Risers
Intermediate Capital Group (ICG) 2,044.00p 3.39%
Hiscox Limited (DI) (HSX) 1,274.00p 2.58%
Beazley (BEZ) 912.00p 1.45%
3i Group (III) 4,210.00p 1.45%
British American Tobacco (BATS) 3,873.00p 1.44%
Vodafone Group (VOD) 81.90p 1.36%
GSK (GSK) 1,421.50p 1.35%
Rio Tinto (RIO) 4,398.50p 1.21%
Games Workshop Group (GAW) 16,210.00p 1.06%
Sainsbury (J) (SBRY) 284.60p 0.92%
FTSE 100 - Fallers
CRH (CDI) (CRH) 6,800.00p -4.41%
Ashtead Group (AHT) 4,679.00p -2.58%
Croda International (CRDA) 2,854.00p -2.33%
WPP (WPP) 411.70p -2.07%
Smurfit Westrock (DI) (SWR) 3,359.00p -2.04%
Pershing Square Holdings Ltd NPV (PSH) 4,100.00p -1.91%
Melrose Industries (MRO) 520.80p -1.77%
Persimmon (PSN) 1,170.00p -1.76%
St James's Place (STJ) 1,188.50p -1.70%
Unite Group (UTG) 789.00p -1.62%
FTSE 250 - Risers
Bloomsbury Publishing (BMY) 517.00p 6.16%
Lion Finance Group (BGEO) 7,400.00p 3.93%
Bridgepoint Group (Reg S) (BPT) 346.20p 3.28%
W.A.G Payment Solutions (WPS) 88.00p 2.80%
Foresight Solar Fund Limited (FSFL) 92.00p 2.56%
Lancashire Holdings Limited (LRE) 622.00p 2.31%
Bytes Technology Group (BYIT) 337.00p 2.12%
Helios Towers (HTWS) 119.80p 1.53%
Morgan Sindall Group (MGNS) 4,625.00p 1.43%
Pollen Street Group Limited (POLN) 810.00p 1.25%
FTSE 250 - Fallers
Aston Martin Lagonda Global Holdings (AML) 74.00p -7.38%
WH Smith (SMWH) 1,008.00p -4.00%
Safestore Holdings (SAFE) 653.50p -2.83%
Wetherspoon (J.D.) (JDW) 759.00p -2.63%
Trainline (TRN) 278.00p -2.59%
B&M European Value Retail S.A. (DI) (BME) 228.30p -2.56%
Pets at Home Group (PETS) 235.80p -2.48%
Hochschild Mining (HOC) 267.60p -2.48%
QinetiQ Group (QQ.) 485.20p -2.22%
JTC (JTC) 842.00p -2.21%
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