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London open: Stocks decline as China inflation slows
London shares were on the back foot on Wednesday after an easing in Chinese inflation fuelled worries about the country’s weakening economy.
China’s consumer price index rose 1.6% in September from a year earlier, slowing down from a 2% increase in August, according to the National Bureau of Statistics. Analysts had been expecting a 1.8% increase.
The decline was driven by a fall in food price inflation, particularly pork prices.
“Looking ahead, we expect the fall in consumer price inflation to be temporary,” said Julian Evans-Pritchard, China economist at Capital Economics. “A sharp fall in pig prices in recent months means that pork price inflation will remain elevated.”
Close to home, investors are awaiting the UK’s labour market report at 0930 BST.
Analysts expected the data to show the UK added 140,000 jobs during the period, compared to 42,000 in the previous three months.
Average weekly earnings are estimated to have climbed 3.1% following a 2.9% gain the prior quarter when it reached a six-year high. The unemployment rate is forecast to hold at 5.5%.
Jobless claims in September are projected to have fallen 2,200 after a 1,200 increase in August.
The Bank of England will be carefully assessing the jobs market, particularly wage growth, as policymakers weigh the best timing for an interest rate hike. Last week the central bank said in its policy meeting minutes that costs pressures in the labour market were rising too slowly for inflation to return to the Bank’s 2% target.
Later on, US retail sales figures will be released at 1330 BST and are expected to reveal a 0.2% increase in September, the same rate of growth as the previous month. The report is an important indicator of consumer spending which is a major contributor to gross domestic product.
Company-wise, Hargreaves Lansdown was a top riser after reporting a 11% increase in revenue to £78.5m, on the back of a 24,000 increase in new clients in the quarter to 30 September.
Domino’s Pizza gained after saying full-year results are likely to be ahead of its expectations, as it delivered a tasty performance in the third quarter and a solid start to the fourth quarter.
N Brown jumped as the company said it remains optimistic of a turnaround after reporting a half-year decrease in profits.
A measure of mining stocks declined, including Glencore, Anglo American and BHP Billiton, on China deflation fears.
Oil producers, including BP, Tullow Oil and Premier Oil, were also lower as Brent and West Texas Intermediate crude fell 0.3% to $49.09 per barrel and 0.04% to $46.64 per barrel, respectively.
