(Reuters) – London shares fell on Wednesday as investors manipulated headline U.K. inflation, hitting the Bank of England’s target on lower service price inflation, while Vodafone (NASDAQ:) profits capped losses.
Blue chip shares fell 0.2% to 8,172.5 points by 706 GMT, while mid-cap shares also fell 0.2% to 20,366.02 points. The pound strengthened against the dollar.
Investors were faced with a slower-than-expected decline in service price inflation, which the Bank of England said provides a clearer picture of medium-term inflation risks.
The data showed service price inflation fell to 5.7% in May, compared with a Reuters poll of economists who expected 5.5%.
Underlying price pressure remained strong, spooking investors that a rate cut in August could be ruled out.
Headline inflation returned to 2%, the Bank of England’s target.
The central bank will meet on Thursday to discuss borrowing costs.
Vodafone shares added 1% after the mobile group confirmed it had sold an 18% stake to India’s Indus Towers for 1.7 billion euros ($1.83 billion).
Spectris was the biggest loser in the mid-cap index, falling 11% after the scientific instruments maker warned of lower-than-expected profits due to weak demand in China.