Stocks in London struggled for direction at the close on Wednesday, following a CPI print from the US, and amid general uncertainty in Europe.
The FTSE 100 index rose 4.56 points, 0.1%, at 8,030.33. The FTSE 250 closed down 68.59 points, 0.3%, at 20,359.21. The AIM All-Share fell 1.57 points, 0.2%, at 729.29.
The Cboe UK 100 climbed 0.2% at 807.56, the Cboe UK 250 retreated 0.4% at 17,791.49 and the Cboe Small Companies fell 1.1% to 15,905.86.
In Europe, the CAC 40 in Paris fell 0.1%, while the DAX 40 in Frankfurt eased 0.2%, closing well above early lows.
In the US at the time of the London close, the Dow Jones Industrial Average was up 0.4%, the S&P 500 was 0.1% higher but the Nasdaq Composite was down 0.2%.
The consumer price inflation index sped up to 2.6% on-year in October from 2.4% in September, and in line with the FXStreet-cited consensus. September had been the smallest on-year CPI increase since February 2021.
Monthly, consumer prices rose 0.2% in October, the same as in September.
Notably, energy prices were unchanged monthly in October, after a decline of 1.9% in September.
Core prices - which excludes food and energy - rose 3.3% annually in October, matching September’s rise and falling in line with market consensus. Monthly core prices edged up 0.3%, also unchanged from the prior month.
After the data release, the CME FedWatch tool put the chances of a 25 basis points rate cut at the December Fed meeting at 83% compared with 59% a day earlier.
‘The October CPI report held few surprises but highlighted that progress on inflation has started to stall,’ economists at Wells Fargo said.
The broker thinks the Federal Reserve will still cut rates at its December meeting but is more circumspect thereafter.
‘The inflation data over the past few months have not shown much additional progress, and the election outcome has raised new questions about the path ahead for price growth. In addition, recession risks seem to have diminished somewhat relative to the summer months. As a result, we think the time is fast approaching when the [Federal Open Market Committee] will signal that the pace of rate cuts will slow further, perhaps to an every-other-meeting pace starting in 2025.’
Pooja Sriram at Barclays stuck to her call for a 25bp cut at the December meeting, but maintains that it could still be a ‘close call given we will get one more payroll report and CPI report before the meeting.’
In London, Bank of England policymaker Catherine Mann, the most hawkish Monetary Policy Committee member and the only one to vote for a hold at last week‘s meeting, said inflation in the UK has not been ‘vanquished.’
Mann, speaking at the BNP Paribas Global Markets Conference, said services inflation in the UK is ‘pretty sticky’ and that the slowdown in headline CPI masks the underlying dynamics.
She said that most factors in the inflation basket are showing ‘upward bias’ and that there is a threat to inflation moving higher owing to energy prices.
The US inflation figures saw the dollar pare some gains. Nonetheless, its advance continued.
The pound was quoted at $1.2714 late on Wednesday afternoon in London, compared to $1.2739 at the equities close on Tuesday.
The euro stood at $1.0568, down against $1.0600. Against the yen, the dollar was trading higher at JP¥155.24 compared to JP¥154.69.
On London’s FTSE 100 Smiths Group stormed 10% higher after raising its outlook on the back of a strong start to its financial year, and increasing its share buyback after opting against pursing an acquisition it had sized up.
Smiths now expects annual organic revenue growth in the 5% to 7% range, its guidance boosted from the 4% to 6% range. In addition, it now expects a 40 to 60 basis point expansion in its operating profit margin from 16.8% in financial 2024. It had previously predicted ‘continued margin expansion’.
Russ Mould at AJ Bell said the firm appears to be ‘firing on all cylinders,’ which may ‘reduce any clamour for a further break-up of a business.’
But Intermediate Capital Group fell back 6.1% after reporting profit fell nearly 20% in the first six months of its current financial year as revenue plummeted within its Investment Co division.
The London-based asset manager said pretax profit for the six months that ended September 30 was £198.4 million, falling 18% from £241.9 million last year.
This was primarily due to pretax profit for Investment Co dropping 97% to £2.0 million from £79.2 million the year before, as revenue plummeted 65% to £50.2 million from £141.8 million.
Rate sensitive housebuilders fell back as lenders raised mortgage rates despite the cut in interest rates last week. On Tuesday, Santander, HSBC and TSB all pushed mortgage rates higher.
Taylor Wimpey fell 2.2%, Barratt Redrow faltered 2.2% and Persimmon slid 1.9%.
On the FTSE 250, Dowlais jumped 6.6% as the company said it is trading in line with expectations and confirmed its full-year guidance.
Dowlais, which was spun-off from FTSE 100 listing Melrose, reiterated its expectations of a mid-to-high single digit percentage adjusted revenue decline and an adjusted operating margin of between 6.0% and 7.0% in constant currency.
Elsewhere, Just Eat Takeaway.com jumped 15% after selling Grubhub to New York-based food delivery startup Wonder Group for $650 million.
‘This is unalloyed good news - we would have been happy had Just Eat closed GrubHub; getting a €650 million reduction in net debt represents a good deal for this asset, and not too far off our previous valuation of the asset (at less than €850 million),’ said Panmure Liberum.
‘Grubhub was a shrinking business in a growing market that Just Eat couldn’t afford to support; its absence will free up some cash flow for other purposes,’ it added.
‘This is the catalyst that has been hoped for,’ the broker said.
Brent oil rose to $72.32 a barrel at the time of the London equities close on Wednesday, up from $72.02 late Tuesday.
The price of gold was quoted at $2,591.88 an ounce late Wednesday afternoon, down from $2,600.44 at the same time on Tuesday.
Thursday’s local corporate calendar sees a trading statement from insurer Aviva and half-year results from luxury goods manufacturer Burberry, water supplier United Utilities and engineering outfit Spirax Group.
The global economic calendar has eurozone GDP figures 1000 GMT, plus US PPI data and US weekly jobless claims numbers at 1330 GMT.
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