U.K. stocks inched up on Wednesday as investors weighed up weak consumer prices, while the British pound wobbled on more dovish talk on interest rates by a Bank of England member.
The FTSE 100 index UKX, +0.12% inched up 0.1% to 7,630.10, which would make for the third-straight winning session, though gains for the week so far are only sitting at 0.5%. The pound GBPUSD, -0.0691% pulled back from earlier losses to trade flat at $1.3011.
Against a backdrop of sluggish growth in the U.K. and an outlook for subdued growth, an expansionary monetary stance and possible further interest rate cuts would be appropriate, said Bank of England Monetary Policy Committee member Michael Saunders in prepared remarks for a speech in Northern Ireland on Wednesday.
He follows two other members who have recently voiced support for a dovish stance on policy. The next Bank of England Monetary Policy Committee meeting will take place on January 30.
Meanwhile, data showed the annual rate of U.K. consumer price inflation fell to 1.3% in December, from 1.5% the prior month, which was below a consensus for stable inflation from analysts polled by The Wall Street Journal.
But Friday’s U.K. retail sales data and next week’s purchasing managers index data will give an even clearer idea on how the economy has been performing, said Bethel Loh, macro strategist at ThinkMarkets.
U.K. markets struggled alongside European markets while investors fretted over possible renewed trade tensions between the U.S. and China as the signing of a partial trade deal between the countries is expected later on Wednesday.
Among active stocks, shares of Persimmon PSN, +1.00% rose 1% after the U.K. house builder said it expects profit to be in line with market expectations. The company also said it was making good progress on improving quality and customer care after an independent review criticized it over “poor workmanship.”
“We remain bullish on the name given the group’s strong balance sheet, well covered yield and robust fundamentals in the low-end of the pricing market where Persimmon operates,” said David O’Brien, analyst at Goodbody.
Banks were under some pressure, with Royal Bank of Scotland (RBS) RBS, -2.30% RBS, -2.69% dropping 2.5%. The bank was downgraded by analysts at Barclays on Tuesday to underweight, alongside AIB Group A5G, -2.52%.
“For RBS we expect the restructuring of NatWest Markets and Ulster to be expensive, with long-dated capital return and NIM [net interest margin] headwinds likely stronger than expected,” said Barclays.