Shares in Riverton fell on Wednesday after new figures showed inflation picking up again, cooling hopes that the central bank would begin cutting interest rates before the end of the year.
The national statistics office said consumer prices rose 3.1 percent compared with a year earlier, up from 2.7 percent the month before and above the 2.8 percent most economists had expected. Higher electricity bills, rents and restaurant prices drove most of the increase.
The RX40, the main index on the Riverton exchange, closed 1.4 percent lower, its weakest day in six weeks. The yield on ten-year government bonds rose to 3.6 percent, the highest level since the spring.
Builders and retailers hit hardest
Housebuilders led the losses, with Valley Homes and Northvale Construction Group each falling more than 4 percent, as investors priced in mortgage rates staying elevated. Retailers also slipped on worries that households would rein in spending ahead of the holiday season.
Banks moved the other way. Lenders tend to benefit when rates stay high, and shares in the three largest domestic banks gained between 1 and 2 percent.
The market had already pencilled in a rate cut by December. This number makes that much harder to justify.
Elena Varga, chief economist at Harborline Capital
Not everyone sees cause for alarm. Some analysts noted that the jump was concentrated in a few categories and that core inflation, which strips out energy and food, edged up only slightly.
One bad month is not a trend. If wages keep cooling, prices should follow by early next year.
Marcus Delaney, fund manager at Elmbridge Asset Partners
What to watch next
Traders will now look to next week’s jobs report for signs of whether wage growth is slowing. The central bank’s rate-setting committee meets next month, and its governor is due to address the National Assembly’s finance committee before then.
The euro was little changed against major currencies, while gold edged higher as some investors sought safer assets.
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