London stocks wobbled on Wednesday as the FTSE 100 hovered just below the 10,500 mark, pressured by a fresh inflation reading that reignited concerns about the Bank of England's next move. The blue-chip index slipped 0.04% to 10,493.40 by mid-morning, after a brief opening gain faded quickly.
The Office for National Statistics reported that the Consumer Prices Index rose to 3.3% year-on-year in March, up from 3.0% in February, driven largely by a sharp increase in motor fuel costs. Petrol prices climbed 8.6 pence per litre to 140.2p, while diesel surged 17.6p to 158.7p, pushing transport inflation nearly to 4.7%. Services inflation, a key metric for the BoE, hit 4.5%.
The data arrives at a delicate moment for investors, who are now debating whether the central bank will be forced to keep interest rates higher for longer. "This inflation jump is uncomfortable for the MPC," said Ruth Gregory, deputy chief UK economist at Capital Economics, though she expects a drop to 2.9% in April once base effects fade. Luke Bartholomew of Aberdeen added that softer labour markets and sluggish growth should "ultimately limit the size and extent of the coming inflation shock."
On the corporate front, Reckitt Benckiser was the biggest drag on the index, sliding nearly 5% after reporting a 1.3% increase in core like-for-like net revenue for the quarter, well below the 2.9% analysts had expected. The consumer goods giant also warned that its first-half adjusted operating profit margin would be about 200 basis points lower than last year's 24.6%, citing elevated commodity prices. "If commodity prices remain at significantly elevated levels throughout the year, we would anticipate an impact on consumer demand," the company said.
JD Sports also weighed on the retail sector, falling sharply after announcing that chairman Andrew Higginson will step down following the annual shareholders meeting on July 21. Darren Shapland will serve as interim chair. Analysts described the move as unexpected.
However, losses were partially offset by gains in mining and energy stocks. Fresnillo, Rio Tinto, Antofagasta, and BP all posted gains, supported by firming commodity prices and a softer outlook for rate-sensitive sectors. BP, in particular, benefited from ongoing geopolitical tensions in the Middle East, with US President Donald Trump maintaining a naval blockade around Iran even as a ceasefire continues, leaving oil supply uncertain.
Elsewhere, Associated British Foods drew attention after news that its Primark retail arm is set for a spin-off from the food division. CEO George Weston flagged that the ongoing Middle East conflict could weigh on consumer spending, saying, "There is a risk to Primark sales if the conflict persists and consumer spending deteriorates."
Market participants now look ahead to the Bank of England's next policy meeting, where expectations are for a cautious stance. "The BoE will likely stick with a wait-and-see mode next week," Bartholomew noted. The inflation data, combined with mixed corporate earnings, has left the FTSE 100 in a tight range, with traders weighing the potential for further rate hikes against signs of economic weakness.
