A reading on UK consumer prices gave both London shares and the pound a boost early Wednesday, as the headline rate inflation eased but ‘sticky’ core inflation means the Bank of England has more work to do.
The FTSE 100 index opened up 8.25 points, or 0.1% at 7,859.28. The FTSE 250 was up 13.42 points, 0.1%, at 19,961.46, and the AIM All-Share was up 1.68 points, or 0.2%, at 859.87.
The Cboe UK 100 was up 0.1% at 785.81. The Cboe UK 250 was down 0.1% at 17,386.00, but the Cboe Small Companies was up 0.1% at 13,775.55.
In December, the UK consumer price index rose annually by 10.5%, compared to a 10.7% rise in November. Consensus had expected 10.6% inflation last month, according to FXStreet.
The print is down a from a four-decade high of 11.1% in October.
‘The potential downtrend in UK inflation could fan expectations that the Bank of England may hint an end to its tightening cycle, but we wouldn‘??t risk getting too excited, too soon,’ said Tom Hopkins, a portfolio manager at BRI Wealth Management.
‘The annualized core inflation, which strips out energy and food, held firm at 6.3%, the same reading booked in November, showing inflation is sticking. We do believe there are further rate hikes to come from the Bank of England if they want to show they are serious about bringing this CPI figure down.’
Earlier this month, the Bank of England’s chief economist said that a ‘distinctive context’ within the UK creates the potential for inflation to prove ‘persistent’.
In December, the Bank of England raised UK interest rates by 50 basis point to 3.5% in an attempt to return inflation to its 2% target.
In February, the Bank of England will meet again. Currently, markets expect another 50 basis point rise in rates.
The pound was quoted at $1.2326 at early on Wednesday in London, higher compared to $1.2278 at the close on Tuesday.
In London, Smiths Group climbed to the top of the FTSE 100, up 2.5% in early morning trade.
The engineering firm updated guidance as it reported continued strong organic revenue growth in the second quarter of its financial year, ending January 31, noting growth across all its businesses.
It now expects to deliver low double-digit percentage organic revenue growth for the first half and organic revenue growth of ‘at least’ 7% in the full-year, as well as ‘moderate’ margin improvement.
Antofagasta rose 0.4% after it said it achieved full-year production and cost guidance despite an ongoing drought in Chile and higher input costs.
In 2022, the firm production 646,200 tonnes of copper at a cash cost of $1.61 per pound. Antofagasta said this was within guidance but 10% lower than last year as a result of a temporary reduction in throughput at Los Pelambres because of the drought in Chile.
Gold production for the full year was 176,800 ounces, within guidance but 30% lower than in the previous year as a result of expected lower grades at Centinela.
In the FTSE 250, Greggs was up 1.6% after Deutsche Bank raised the bakery chain to ’buy’ from ’hold’ with an increased price target of 2,950 pence.
WH Smith was 0.7% higher after it said it delivered a strong performance in the 20 weeks to January 14, with revenue up 41% against the previous year and up 20% against pre-pandemic levels.
The travel and high street retailer noted particular strength in its Travel business which saw revenue up 77% against financial 2022 and up 48% against financial 2019, meaning pre-pandemic.
WH Smith noted this performance was achieved despite passenger numbers remaining ‘well below’ 2019 levels.
Elsewhere in London, Just Eat Takeaway soared 12% as it swung to positive adjusted earnings before interest, tax, depreciation and amortisation of €150 million in the second half of 2022 from negative €134 million in the first half.
This means the food delivery app posted positive adjusted Ebitda of €16 million for all of 2022, swung from negative €350 million in 2021. Just Eat said the performance was driven by improved revenue per order, improved delivery costs per order, and lowered overheads.
In European equities on Wednesday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was marginally lower. The euro stood at $1.0842, higher against $1.0804.
Japan’s central bank left its ultra-easy monetary policy unchanged on Wednesday, bucking heavy speculation that it could again tweak a key lever and sending the yen plunging against the dollar.
Officials shocked the market last month by adjusting one of its policy tools, widening the band in which it allows rates for 10-year government bonds to move.
However, on Wednesday, policymakers left the yield curve control range intact and said it would continue with ‘large-scale’ purchases of government bonds to support the parameters.
The decision boosted Tokyo stocks but sent the yen falling against the US dollar.
Against the yen, the dollar was trading at JP¥129.84 early Wednesday, higher compared to JP¥128.18 at the time of the London equities close on Tuesday. In Tokyo on Wednesday, the Nikkei 225 index closed 2.5% higher.
In China, the Shanghai Composite finished flat, while the Hang Seng index in Hong Kong ended up 0.5%. The S&P/ASX 200 in Sydney closed up 0.1%.
In the US on Tuesday, Wall Street ended mostly lower as trading resumed following a public holiday. The Dow Jones Industrial Average ended down 1.1%, the S&P 500 down 0.2%, and the Nasdaq Composite up 0.1%.
Brent oil was quoted at $86.38 a barrel at early in London on Wednesday, up from $85.56 late Tuesday. Gold was quoted at $1,911.80 an ounce, down slightly against $1,912.88.
Still to come on Wednesday’s economic calendar, the UK will publish its house price index at 0930 GMT. At 1330 GMT, the US will release a producer price index print.
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