The FTSE 100 recovered early losses on Wednesday as traders shrugged off a hotter-than-expected UK CPI reading and a US tech-driven sell-off overnight.
Defensive ‘safer’ names such as Unilever, United Utilities, Intertek, and British American Tobacco were in favour and helped the FTSE 100 edge past 9,200 in mid-morning trade.
The interest in defensive non-cyclical UK stocks followed a sell-off in US stocks overnight as investors booked profits in US tech ahead of key events, including Fed minutes and Jackson Hole.
“Markets tracked overnight declines on Wall Street, where technology shares led losses as investors turned more cautious ahead of the release of the FOMC minutes and the Jackson Hole Symposium in the US,” said Frank Walbaum, Market Analyst at Naga.
“The selloff reflected concerns about overextended valuations, as investors moved to profit-taking after a period of strong and rapid gains.”
UK markets started the session in the red after UK CPI for July came in at 3.8% – an increase on June’s 3.6% figure.
However, the concern around higher CPI inflation was short-lived, with much of the increase due to flight tickets, and core inflation was little changed on the month before.
“Despite the sell-off in the US overnight, emanating from the technology sector, UK stocks were pretty steady in early trading on Wednesday,” explained AJ Bell head of financial analysis, Danni Hewson.
“The index was not helped by the hotter than expected UK inflation report – which gave sterling a modest lift. A stronger pound hits the relative value of the FTSE 100’s dominant overseas earnings.
“The implications for interest rates of the higher than anticipated CPI reading also saw housebuilders foundations quiver given, in turn, what this might mean for mortgage affordability and availability.”
Persimmon, Taylor Wimpey and Barratts were all down more than 1%.
Anglo American was the FTSE 100’s top faller with losses of 2%.