Hotter-than-expected inflation drags UK stocks over 1% down; AstraZeneca falls

By Khushi Singh and Bansari Mayur Kamdar

(Reuters) -UK stocks fell on Wednesday as higher-than-expected consumer inflation data cemented fears of the Bank of England further tightening monetary policy.

The FTSE 100 closed 1.1% lower, with heavyweight drugmaker AstraZeneca falling 5.8% to the bottom of the index after a data abstract on its experimental precision drug’s use in lung cancer patients in a late-stage trial disappointed some analysts.

The mid-cap FTSE 250 shed 1.6%.

Data showed British annual consumer price inflation held at an 18-month low of 6.7% in September, while the core inflation fell less than expected, raising fears of another BoE rate hike.

A rise in fuel prices between August and September put upward pressure on the annual CPI rate.

“Today’s announcement only puts further pressure on the Bank of England’s Monetary Policy Committee, and whether they decide to continue to apply interest rate pressure to bring inflation down to an acceptable level,” said Richard Flax, Chief Investment Officer at Moneyfarm.

“Whilst there are points of encouragement from today’s figures, the global macroeconomic outlook is still uncertain and emerging tensions in the Middle East could have real consequences on commodity prices including the price of oil which will have knock-on effects for inflation in the UK.”

British government bond prices fell, while the sterling ticked higher following the data.

Rate-sensitive homebuilders fell 4.4% and were the top decliners among sectors, after Barratt Developments refrained from providing a full-year profit forecast, citing an “uncertain” outlook. The stock fell 5.1%

“There is still demand for houses but mortgages are so expensive that it is creating uncertainty and making the outlook very difficult to get a clear picture of,” said Danni Hewson, head of financial analysis at AJ Bell.

Whitbread climbed 1.3% after the hotelier announced a share buyback plan of 300 million pounds ($366.2 million) following a 44% rise in half-yearly profit.

(Reporting by Khushi Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Dhanya Ann Thoppil, Varun H K, Alexandra Hudson)