The FTSE 100 retreated in afternoon trading on Wednesday, closing 0.2% lower at 8,193.94 as persistent core US inflation dashed hopes for a significant interest rate cut next week. The FTSE 250 also fell, down 0.6% at 20,537.25, while the AIM All-Share slipped 0.8% to 738.09.
In the US, consumer price inflation cooled more than expected, with annual inflation dropping to 2.5% in August, its lowest since February 2021, down from 2.9% in July. However, core inflation remained unchanged at 3.2%, and the monthly core figure accelerated to 0.3%, above the 0.2% forecast.
The CME FedWatch Tool now suggests an 85% probability of a 25-basis-point rate cut next week, with a 15% chance of a larger 50-basis-point cut, narrowing expectations for a more aggressive move.
On the FTSE 100, Rentokil tumbled 20% after warning that slower growth in North America and a stronger pound would impact full-year profits. The pest control company now expects organic revenue growth in North America of around 1%, down from its previous forecast of 2% to 4%.
Meanwhile, Trustpilot surged 12% after reporting half-year profits, forecasting full-year earnings at the upper end of expectations, and announcing a £20 million share buyback.
WH Smith rose 11% following a strong trading update and a £50 million share buyback plan. Analysts praised the retailer for its shareholder returns, with Barclays raising its price target for WH Smith to 1,590p from 1,535p.
Costain dropped 8.6% after ASGC Construction sold a 15% stake in the company, worth £37.9 million.
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