Overall consumer price inflation fell to 8.7% in April from March's 10.1%, the Office for National Statistics said. This is higher than the 8.6% expected in the Reuters consensus of economists.

Rate-sensitive stocks, especially in real estate and the financial sector, underperformed, while UK bond yields gained 5 bps 4.2%.

Kallum Pickering from Berenberg sees quite a few headwinds for the UK economy: “After April inflation data far exceeded the BoE’s expectations, the bank looks likely to keep hiking into summer. Stickier inflation will squeeze real growth, while tighter monetary policy poses downside risks to demand. Meanwhile, the apparent stalling of the Chinese post-pandemic rebound, as well as a slowing US, will weigh on trade and production.“

In this context, the FTSE 100 was down 0.3% this morning, with worries about further BoE rate hikes weighing on sentiment, as well as stalling negotiations on raising  the U.S. debt ceiling.

Among stocks, Cineworld Group rose 1.7% after it said it expects to leave bankruptcy protection in July after its restructuring proposal got approved by lenders.

Things to read today:

Power of Siberia: China keeps Putin waiting on gas pipeline (Financial Times)

Germany Endures First Recession Since Covid on Consumers (Bloomberg)