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Dec 14 (Reuters) – The UK’s main stock index closed lower on Wednesday as investors took some relief from softer-than-expected British inflation as investors braced for an interest rate hike from the U.S. Federal Reserve.
The export-oriented FTSE 100 (.FTSE) fell 0.1%, while the domestically focused FTSE 250 (.FTMC) fell 0.3%.
British inflation fell more than expected in November after hitting a 41-year high in October, a surge in prices peaking and some relief as the Bank of England prepares to raise interest rates on Thursday.
“We’ve had a little bit of lower inflation, but a lot of that inflation has been driven by the recent decline in energy prices,” said Giles Coughlan, chief market analyst at HYCM.
“This means that when we start to see oil prices rise again, UK CPI will go higher and put pressure on the Bank of England once again. They are already projecting a five-quarter recession. … The risks of stagflation is very real.”
The inflation data follows a report on Tuesday that showed UK wage growth rose by a more-than-expected 6.1% in the August-to-October period.
“Wages have risen more than where the Bank of England would like, so the bank is still likely to raise rates by 50 basis points on Thursday,” said Dean Turner, chief euro zone and UK economist at UBS Global. Wealth Management.
UK Housebuilders (.FTNMX402020) fell 1.2% as JPMorgan analysts published a cautionary note on the sector, downgrading some stocks, citing a “seasonal lull” for the next few months.
Markets now focus on the Fed’s monetary policy decision due at 1900 GMT, where the central bank is expected to raise rates by 50 basis points.
Among single stocks, TUI AG fell 8.0% after the world’s biggest holiday company planned to repay Covid support by raising capital next year.
BT Group ( BT.L ) was the bright spot, rising 2.1% after the telecoms and network provider submitted its new Equinox 2 wholesale fiber offer to British regulator Ofcom.
Reporting by Johan M Cherian and Srishti Achar in Bengaluru; Editing by Rashmi Aich, Maju Samuel and Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
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