More poor China data put stimulus measures back into focus, supporting equity prices in Europe heading into Wednesday afternoon, with a US inflation reading on Thursday the next risk event.
The FTSE 100 index was up 66.71 points, 0.9%, at 7,594.13. The FTSE 250 was up 101.19 points, 0.5%, at 18,942.73, and the AIM All-Share was up 1.18 points, 0.2%, at 760.02.
The Cboe UK 100 was up 0.9% at 757.27, and the Cboe UK 250 was up 0.6% at 16,612.18, whilst the Cboe Small Companies was down 0.3% at 13556.75.
China slipped into deflation as consumer prices contracted last month for the first time in more than two years, official data showed, as slowing domestic spending weighs on the country’s post-Covid economic recovery.
The consumer price index, the main gauge of inflation, fell 0.3% on-year in July, the National Bureau of Statistics said, having flatlined in June. Analysts polled by Bloomberg had anticipated a 0.4% decline in the index for July.
‘Interestingly the FTSE 100 was higher this morning with firms whose fortunes are traditionally tied to China enjoying gains, perhaps amid hopes of further Chinese stimulus to get the economy moving,’ AJ Bell analyst Russ Mould commented.
Asia-focused bank Standard Chartered was up 1.1%. Insurer Prudential, which is also Asia-focused, was up 1.5%.
Meanwhile, miners Anglo American, Antofagasta and Glencore were up 1.7%, 2.0% and 2.2%, respectively.
AJ Bell’s Mould said that the latest figures from China ‘may give central bankers in the US, UK and Europe pause for thought when they weigh up their next steps’.
US inflation data, which will be released on Thursday at 1330 BST, may offer some direction to how central banks will react in the coming months.
US CPI data for July will be released on Thursday at 1330 BST. According to FXStreet consensus, markets are expecting a 3.3% annual rise in headline US consumer price inflation in July. Core inflation, however, is meant to cool slightly to 4.7% in July, from 4.8% in June.
Another inflation slowdown will be the ideal outcome, as it would take some sting out of Federal Reserve interest rate expectations.
On Tuesday, a leading US Federal Reserve official said he thinks interest rates may have peaked but warned they will need to stay inflated for a while.
In a speech, Patrick Harker, president of the Federal Reserve Bank of Philadelphia said: ‘Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work.’
Stocks in New York were called higher. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite are all called up 0.3%.
In the FTSE 100, Hiscox lost 6.2%.
The Hamilton, Bermuda-based insurer said in the first half of 2023, pretax profit jumped tenfold to $264.8 million from $25.4 million a year prior. The company’s first half-year profit was almost as high as that of its entire 2022 profit of $275.6 million.
Looking ahead, Hiscox said its portfolio is well positioned to deliver high-quality growth in earnings and revenue, citing investment income tailwinds and a long-term structural growth opportunity in retail.
It said its retail businesses have a promising outlook, though ‘tempered by our deliberate actions not to prioritise growth at the expense of quality of earnings’.
In addition, Hiscox said its insurance-linked strategy arm ILS suffered net outflows of $219 million, ‘as third-party capital investment appetite remains subdued’.
Flutter Entertainment lost 4.4%.
It said its US arm reached an ‘inflection point’, helping the gambling firm swing to a first-half profit.
The Paddy Power owner expects full-year earnings in line with market expectations, but warned of softer conditions in Australia.
In the FTSE 250, TP ICAP shares jumped 10%.
Revenue in the first half of the year climbed 4.8% to £1.13 billion from £1.08 billion a year prior. Pretax profit improved 26% to £91 million from £72 million.
TP ICAP declared a 4.8p per share interim dividend, up 6.7% from 4.5p. In addition, it said it is launching a £30 million share buyback programme.
‘We will continue to assess opportunities to free up more cash to pay down more debt, and/or initiate further buybacks,’ it said.
Hill & Smith added 7.5%.
The Solihull, West Midlands-based infrastructure construction company said in the first half of 2023, pretax profit jumped 42% to £57.2 million from £40.2 million a year prior. Revenue rose 20% to £420.8 million from £349.9 million, which the company said was driven by US growth.
Looking ahead, the company expects a boost from US industrial growth drivers, with 2023 underlying operating profit expected to be modestly ahead of the current market consensus of £111.8 million, with a range of £110.2 million to £112.8 million. The consensus is 15% higher than £97.1 million Hill & Smith achieved in 2022.
Domino’s Pizza rose 2.5%. Jefferies raised Domino’s Pizza to ’hold’ from ’underperform.’
On AIM, Enteq Technologies rose 20%.
The energy services technology and equipment supplier said its Saber drilling tool met test objectives during extensive downhole drilling testing in North America, providing a ‘game-changing’ alternative to traditional rotary steerable systems.
Enteq said Saber has the potential to disrupt the RSS market within the drilling industry, which it claims is worth more than $2 billion per year, claiming it can bring about ‘new levels of performance, both commercial and technical, for operators and service companies’.
In European equities on Wednesday, the CAC 40 in Paris was up 1.2%, while the DAX 40 in Frankfurt was up 1.1%.
The pound was quoted at $1.2735 at midday on Wednesday in London, up compared to $1.2718 at the equities close on Tuesday. The euro stood at $1.0977, higher against $1.0947. Against the yen, the dollar was trading at JP¥143.25, slightly lower compared to JP¥143.29.
Brent oil was quoted at $86.77 a barrel at midday in London on Wednesday, down from $84.92 late Tuesday. Gold was quoted at $1,925.88 an ounce, virtually unchanged against $1,925.90.
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