Stocks in London closed in the green on Wednesday, as cooling US inflation data reduced the likelihood of aggressive rate hikes by the Federal Reserve next month.
‘We don't often get pleasant surprises surrounding the US inflation data so July's numbers are something to be cherished,’ said ING.
The FTSE 100 index closed up 18.96 points, or 0.3%, at 7,507.11. The FTSE 250 ended up 385.60 points, or 1.9%, at 20,298.00, and the AIM All-Share closed up 5.03 points, or 0.6%, at 919.78.
The Cboe UK 100 ended up 0.4% at 750.90, the Cboe UK 250 closed up 2.1% at 17639.76, and the Cboe Small Companies ended up 0.3% at 14334.41.
In European equities on Wednesday, the CAC 40 in Paris ended up 0.5%, while the DAX 40 in Frankfurt ended up 1.2%.
Wednesday started off slow for stocks in Europe, posting modest losses, but US inflation data released in the afternoon saw major indices spike.
Annually, US consumer prices were up 8.5% in July, slowing from the 9.1% rise seen in June. Market consensus, according to FXStreet, had seen inflation easing only to 8.7% for July.
Versus the previous month, July's prices were entirely flat, slowing from the 1.3% rise in June and behind the market consensus of 0.2%.
Stripping out food and energy, prices were up 0.3% in July from the month before, which the US government noted was a smaller increase recorded in April, May, or June. The July increase matched consensus. On annual basis, core prices rose 5.9%. The annual core CPI rise also was in line with forecasts.
Expectations for the Fed's September meeting were scaled back as analysts digested Wednesday's figures.
On Tuesday, 68% of market participants were expecting the Fed to carry out another 75 basis point rate hike at September's meeting, up from 43% a month before. Following Wednesday's inflation data, however, the probability of a 75 basis point hike stood at just 38%, with the majority view now for the Fed's hiking size to moderate to a half-point.
‘This is not yet the meaningful decline in inflation the Fed is looking for. But it's a start and we expect to see broader signs of easing price pressures soon,’ said Capital Economics.
The dollar fell sharply after US CPI. The pound was quoted at $1.2253 at the London equities close Wednesday, jumping from $1.2086 at the close on Tuesday.
The euro stood at $1.0349 at the European equities close Wednesday, rising against $1.0223 at the same time on Tuesday. Against the yen, the dollar was trading at JP¥132.41, down compared to JP¥134.96 late Tuesday.
Gold was quoted at $1,799.85 an ounce at the London equities close Wednesday, up against $1,793.82 at the close on Tuesday due to dollar weakness.
Brent oil was quoted at $94.77 a barrel at the London equities close Wednesday, down from $97.62 late Tuesday.
Stocks in New York roared ahead, with the DJIA soaring 1.7% in late morning trade, the S&P 500 index rising 2.0%, and the Nasdaq Composite jumping 2.5%.
The FTSE 100's gains were more modest, however, on account of the stronger pound holding back the overseas earnings-heavy index.
The blue-chip index was also dragged down by GSK spin-off Haleon, ending down 8.1% at 279.50 pence, with the stock now down 15% from its IPO price of 330p. GSK, which remains a shareholder in Haleon, closed down 5.5%.
Utilities were lower as the risk-on tone shifted investor favour towards growth stocks. Centrica ended down 5.5% and SSE was down 2.4%, while telecommunications firm BT fell 1.3%. In contrast, tech stock and online grocer Ocado rose 6.6%.
At the top of the FTSE 100 was Admiral, rising 13%, with the insurer reporting a ‘solid set’ of resuts despite a first-half profit fall.
Revenue in the six months to June 30 rose 5.7% year-on-year to £1.85 billion from £1.75 billion. Total UK premiums written, which comprises its motor, home and travel insurance units, was 2.8% higher year-on-year at £1.27 billion from £1.23 billion.
Group pretax profit fell 48% year-on-year to £251.3 million from £482.2 million. Compared to pre-Covid times, however, pretax profit was up 19%. Pretax profit was in line with consensus, broker Peel Hunt noted.
Fellow insurer Aviva rallied 12% as it unveiled plans for a share buyback amid confidence in its prospects.
In the six months to June 30, its IFRS loss widened to £633 million from a £198 million loss a year prior. Aviva explained that this ‘largely’ reflects adverse market movements and has no impact on capital or cash remittances. Adjusted operating profit rose 14% to £829 million from £725 million.
Aviva declared an interim dividend of 10.3p per share, rising 40% from 7.35p a year earlier, in line with its full year guidance of around 31.0p per share. The interim dividend is worth a total of £289 million.
Looking ahead, Aviva said it is confident of its outlook for 2022, despite a challenging market backdrop. The insurer also said it expects to start a share buyback programme when its 2022 full year results are announced.
In the FTSE 250, TP ICAP rose 14% after the interdealer broker saw interim pretax profit more than double to £72 million from £28 million. TP ICAP upped its dividend by 13% to 4.5p per share from 4.0p a year prior.
4imprint rose 11% after reporting a surge in interim profit and a double-digit rise in interim revenue as total orders increased. The London-based marketer of promotional merchandise booked a 58% rise in revenue to $515.5 million and pretax profit multiplied to $43.9 million from $3.4 million.
Elsewhere, S&U rose 12% after saying both its motor and property bridging divisions continue to outperform its internal expectations.
The motor and property bridge loan provider said its current receivables stand at £370 million, up from £340 million in May. S&U added that profitability in the six months to July 31 exceeded the same period last year.
In Thursday's UK corporate calendar, there are half-year results from Chilean miner Antofagasta, soft drinks bottler Coca-Cola HBC, gambling firm Entain and investment manager M&G.
The economic calendar has Irish inflation at 1100 BST and US initial jobless claims and producer prices out at 1330 BST.
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