A string of mostly positive trading updates from UK companies was giving London shares a boost early Thursday, ahead of a key inflation reading in the US.
Investors hope the consumer price index for December, due at 1330 GMT, will show a continued softening in price pressures, allowing the US Federal Reserve to slow the pace of interest rate hikes.
On the UK corporate front, investors cheered a guidance hike by British Gas owner Centrica, improved trading for hotelier Whitbread, and some more leadership clarity at telecommunications firm Vodafone.
There was by and large more good news from the retail sector as well, though Halfords was a notable exception.
The FTSE 100 index was up 50.01 points, or 0.7%, at 7,774.99 early Thursday. The FTSE 250 was up 127.62 points, or 0.7%, at 19,649.32, and the AIM All-Share was 0.68 of a point, or 0.1%, higher at 852.30.
The Cboe UK 100 was up 0.6% at 777.55. The Cboe UK 250 was up the same 0.6%, at 17,124.38. The Cboe Small Companies was down 0.1% at 13,886.83.
In European equities on Thursday, the CAC 40 in Paris climbed 0.7% and the DAX 40 in Frankfurt was 0.3% higher.
The pound rose to $1.2145 on Thursday morning in London from $1.2125 at the time of the London equities close on Wednesday. The euro softened to $1.0751 from $1.0758. Against the yen, the dollar faded to JP¥131.71 from JP¥132.57.
The US CPI reading is expected to show annual inflation eased to 6.5% last month from 7.1% in November.
The core inflation reading, so excluding food and energy, will be in focus. The yearly core inflation is expected to fall to 5.7% from 6.0%, according to consensus cited by FXStreet.
The release has the potential to be make-or-break for markets.
In Asia on Thursday, stocks were largely higher. The Shanghai Composite closed 0.1% higher, while the Hang Seng in Hong Kong was up 0.4%. In Tokyo, the Nikkei 225 closed flat, having traded higher in early dealings. The S&P/ASX 200 closed up 1.2%.
Already out, China’s consumer price inflation picked up modestly in December, though it remains below target.
The consumer price index rose 1.8% from a year before, quickening from a 1.6% annual rise in November, the National Bureau of Statistics said.
Inflation for the whole of 2022 rose by an average of 2%, making China an outlier compared with other major economies, where prices have been driven higher by energy and food costs and by supply chain snarls.
Beijing had targeted an average inflation rate of 3% for 2022, and the lower figure will give authorities room to provide much-needed stimulus to the economy.
In London, shares in British Gas owner Centrica surged 5.3% in early trade.
It now expects to report 2022 adjusted earnings per share of above 30 pence. In November, it predicted an adjusted EPS at the top end of a 15.1p to 26.0p sell-side analyst range. Adjusted EPS from continuing operations in 2021 amounted to just 4.1p.
‘Infrastructure asset availability and volumes have remained good, and we delivered incrementally strong optimisation performance,’ Centrica said.
In addition, it named Russell O’Brien as chief financial officer, replacing Kate Ringrose from March 1. Ringrose steps down from the post at the end of February but is expected will remain with Centrica until the end of 2023 ‘after an orderly transition’.
O’Brien was most recently treasurer at Shell. He also held a ‘number of senior chief financial officer roles’ at the oil major, Centrica added.
Also on the up, Whitbread added 4.2%. The Premier Inn-owner’s sales in the third quarter to December 1 surged 23% on-year. They were up 29% on pre-virus levels.
Vodafone climbed 3.1%. Aldo Bisio, the chief executive of the telecommunications firm’s Italy arm, will become group chief commercial officer effective Thursday.
Vodafone Spain CEO Colman Deegan will step down from the role on March 31 but will support Vodafone’s temporary group CEO Margherita Della Valle on an interim basis from the start of April until the end of July. Deegan’s successor will be named in ‘due course’.
Spain will now join Vodafone’s Europe cluster. It will report to Serpil Timuray, the CEO of the Europe umbrella.
Nick Read left as Vodafone group CEO last month.
Asos jumped 10%. It still expects a half-year loss but reported ‘encouraging’ margin developments recently.
The online-only fashion retailer said sales fell in the four months to December 31, an outcome it largely expected, as it puts profit improvements and ‘cash generation’ first.
For the four-month period, which it labels P1, revenue fell 4.1% year-on-year to £1.34 billion from £1.39 billion. At constant currency, revenue fell 6%.
Adjusted gross margin fell 10 basis points to 42.9%, though it expects a ‘significant improvement’ in the second half of its financial year. ‘Actions taken on pricing and the reduced use of air freight drove an encouraging progression through the period relative to the prior year,’ Asos said on its margins.
Asos still expects a half-year loss due to inflation and elevated product return rates.
‘Our experts think the outlook for Asos’s sales and margin growth is going to remain pretty challenging in 2023,’ said Zainab Atiyyah, an analyst at Third Bridge, referring to interviews with retail sector executives.
‘Especially as many of their existing customers are set to trade down to lower-cost Asos products from more expensive and higher-margin items. Asos’s customers are also trained to wait for the weekly discounts.’
Hilton Food rose 7.3% as it expects results in line with the board expectations for the year ended January 1.
The food business hailed a ‘pleasing’ festive period performance.
ProCook surged 10% as it reported improved third-quarter trading in the key Christmas period, defying cost-of-living gloom which has cast a dark cloud on the pots and pans seller.
For the third quarter ended January 8, revenue fell 2.5% year-on-year to £22.4 million. Excluding contributions from e-commerce channel Amazon, where it has discontinued sales, revenue improved 0.8%.
During the final four weeks of the quarter, ProCook said revenue improved 2.9% year-on-year, or 5.9% without Amazon.
Halfords tumbled 20%. It said its third-quarter revenue grew but progress was stifled by subdued market conditions in its cycling and tyre-focused units. The motoring and cycling products retailer said revenue in the 13 weeks to December 30 jumped 22% on-year, 4.6% like-for-like.
‘Overall revenues were impacted by softer than expected cycling and tyre markets,’ it cautioned, however. ‘Macro-economic headwinds continue to impact the cycling and consumer tyre markets although we gained share across all our measured markets including Cycling, Motoring and Tyres.’
Halfords reduced underlying pretax profit guidance to a range of £50 million to £60 million, from the lower end of its £65 million to £75 million range previously.
Morses Club is set to wave goodbye to London’s junior AIM market. The doorstep lender believes its ‘most likely’ source of future funds will come from private capital. Its directors performed a review outlining the benefits and drawbacks of retaining an AIM listing.
‘Their belief that continued admission to trading on AIM no longer sufficiently provides the company with the advantage of providing access to capital in the medium to longer-term, nor, in the opinion of the directors, provides significant liquidity to investors,’ Morses said. It said it has support from 51% of shareholders already for the delisting.
Shares slumped 55% in early trade.
A barrel of Brent oil fetched $82.45 on Thursday morning London time, up from $81.43 late Wednesday. Gold traded at $1,882.12 an ounce, up from $1,872.57.
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