London stocks slip as UK's high inflation raises bets for BoE hike

Britain's FTSE 100 slipped on Wednesday, snapping an eight-day rally as consumer prices fell less than expected, boosting bets for one more rate hike from the Bank of England (BoE) at its May monetary policy meeting.

The blue-chip FTSE 100 (. FTSE) fell 0.4%, while the mid-cap FTSE 250 (. FTMC) was down 0.8%, as of 0820 GMT.

Data showed Britain now has Western Europe's highest rate of consumer price inflation, after a weaker-than-expected fall in March to 10.1% from February's 10.4%.

Traders now see a 98.2% probability of a 25-basis-point hike in May, with interest rates peaking in November.

"We saw a substantial rise in rates to the tune of about 4% over an 18-month period," said Mike Coop, UK chief investment officer at Morningstar Investment Management.

"It takes time before those interest rate increases flow through to the real economy as people pay higher rates on their mortgages and companies pay higher rates when they refinance their debt."

The FTSE 100 clocked its longest winning streak since December 2020 on Tuesday, buoyed by defensive and commodity-linked stocks. However, signs of sticky inflation in a stagnating economy have dented investor sentiment.

Industrial miners (. FTNMX551020) lost 1.0%, led by a 2.3% fall in Antofagasta (ANTO.L) after the Chilean miner's copper output fell in the March quarter from the previous three months due to lower water availability and reduced ore grades.

Food, beverages and tobacco sector (. FTUB4510) was a bright spot, up 0.8% on the heels of sticky inflation numbers.

"No signs yet of the cost of living crisis easing means consumer staples will perform more strongly as they are the items of expenditure that are always needed," said Stuart Cole, chief macro economist at Equiti Capital.

Leading losses on the FTSE 250 was Liontrust Asset Management Plc (LIO.L), down 5.5% as the asset manager reported significant quarterly net outflows.