FTSE 100 closes lower as inflation data weighs

London's FTSE 100 index recorded modest losses on Wednesday, closing down 8.04 points, or 0.1%, at 10,878.12. The FTSE 250 index, however, finished higher, gaining 41.79 points to reach 24,897.84, while the AIM All-Share index saw a slight decrease of 0.58 of a point, ending at 814.90.

US Inflation Data Impacts Sentiment

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Trading on Wall Street began subdued following a US inflation report that exceeded expectations. The personal consumption expenditures price gauge increased by 3.7% year-on-year in July, matching June's expansion but surpassing the FXStreet forecast of 3.6%. The core PCE index, the Federal Reserve's preferred inflation measure, advanced 3.3% annually in July, consistent with June's figure and consensus expectations. James Knightley, Chief International Economist at ING, described the inflation rate as slightly firmer than anticipated but noted that it was acceptable. He indicated that if the month-on-month rate remains close to 0.2%, the annual inflation rate will approach 2% over time, though the Federal Reserve's patience remains a key question. Markets are pricing in a potential 25 basis point rate hike before the year's end, while most economists anticipate an extended pause in policy rates.

The pound traded at 1.3590 dollars on Wednesday afternoon, a decrease from 1.3632 dollars at the close of equities on Tuesday. Sterling also eased against the euro, trading at 1.1664 euro from 1.1683 euro. The euro itself weakened to 1.1651 dollars from 1.1671 dollars, while the dollar strengthened against the yen, moving to 159.37 yen from 159.25 yen. The yield on the US 10-year Treasury rose to 4.66% from 4.65%, while the yield on the US 30-year Treasury fell slightly to 5.18% from 5.19%.

Nvidia Earnings and Sector Performance

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Nvidia's share price was 1.1% lower ahead of its earnings release, scheduled for after the Wall Street close on Wednesday. Bank of America anticipates the chip maker will report a sales beat and raise guidance within its usual 3% to 4% range, but suggested that balance sheet disclosures will be more critical. The bank stated that the sales beat is already factored into the price, and the balance sheet will drive future valuation, highlighting a potential shift towards Apple-style payouts as an underappreciated catalyst for the second half of the year and 2027. Meta Platforms saw its shares rise by 2.3% following an announcement that it has agreed to pay US states up to $18 billion and to implement significant new restrictions on teenage use of its social media platforms. The company, owner of Facebook and Instagram, indicated the payment could fund youth online safety initiatives and other state priorities, to be distributed over a decade.

In European markets, the CAC 40 in Paris closed up 0.3%, and the DAX 40 in Frankfurt rose 0.1%. Back in London, declines in oil majors BP and Shell, along with accountancy software provider Sage, limited overall gains. Brent crude oil for October delivery traded at $88.09 a barrel, down from $89.31 the previous day. AJ Bell investment director Russ Mould attributed the oil price decrease to discussions between Iran and Oman regarding a temporary corridor through the Strait of Hormuz, less stringent US sanctions on Tehran than anticipated, and ongoing diplomatic efforts. This reduction in oil prices helped to ease market concerns about inflation. Reflecting the weaker oil price, BP and Shell shares fell 1.1% and 0.5% respectively.

Sage Group was the leading faller on the FTSE 100, down 3.8%, after Intuit, the owner of QuickBooks, lowered its fiscal year 2027 sales guidance. Intuit projected revenue between $23.28 billion and $23.51 billion for FY27, representing 9% to 10% year-on-year growth, which is below the FactSet consensus of $23.72 billion and slower than the 14% growth achieved in the past financial year. Intuit's shares were trading 4.2% lower on Wall Street, recovering from earlier significant declines. Hochschild Mining led the gainers on the FTSE 250, up 6.3%, following a strong first-half financial performance bolstered by higher metals prices. The London-based miner reported a pre-tax profit surge to $365.8 million for the six months ended June 30, an increase from $109.3 million in the prior year, with revenue climbing 62% to $844.4 million. Hochschild noted that while gold production remained broadly consistent, average realised gold and silver prices increased by 47% and 130% respectively, driving revenue growth.

Softcat experienced a decline of 1.8%, as Deutsche Bank Numis downgraded its rating to 'hold' from 'buy'. On AIM, Nexteq saw an 11% increase after its display and human machine interface technology brand, Densitron, secured a new order from a major automotive electronics supplier for customised electric vehicle display solutions. Production is expected to commence in the latter half of 2026, with Nexteq anticipating material increases in production volumes over the subsequent three years as the customer's product rollout expands. Gold traded at $4,596.56 per ounce, down from $4,642.09 on Tuesday. Senior market analyst at Trade Nation, David Morrison, suggested that traders should anticipate a correction or consolidation period for gold, given its recent significant rally.

Looking Ahead

Thursday's global economic calendar includes US initial jobless claims and wholesale inventories data, alongside the Kansas City Fed manufacturing activity report. In the UK corporate calendar, half-year results are expected from packaging and labelling supplier Macfarlane Group and hotel operator PPHE Hotel Group.