Stock prices were higher at midday in London, as the FTSE 100 index drew near the 8,000-point milestone, setting a new record high, ahead of US consumer price inflation data likely to loom large in the thinking of the Federal Reserve ahead of its next interest rate decision.
‘All eyes will be fixed on Washington later as the US Bureau of Labor Statistics posts inflation numbers for January. The expectation is for another modest easing of inflationary pressures and anything more than this could provide a real boost to sentiment - though conversely a renewed move higher in the inflation rate could prompt heavy selling,’ said Russ Mould, investment director at AJ Bell.
The FTSE 100 index was up 38.93 points, or 0.5%, at 7,986.53. The index reached a new all-time high of 7,996.35 earlier in the day, within touching distance of the 8,000-point mark.
The FTSE 250 was up 76.82 points, or 0.4%, at 20,201.34, and the AIM All-Share was up 0.46 of a point, or 0.1%, at 871.57.
The Cboe UK 100 was up 0.6% at 799.34, the Cboe UK 250 was up 0.5% at 17,630.69, and the Cboe Small Companies was up 0.6% at 14,009.41.
The US consumer price index for January is out at 1330 GMT, ahead of the New York open. Markets expect to see annual consumer price inflation to stand at 6.2% in January, according to FXStreet, down from 6.5% in December and slowing notably from the 7.1% annual rise recorded in November.
The reading may be an important indicator of the future of US interest rates, as the US Federal Reserve attempts to push inflation back down to its 2.0% target.
‘A sufficiently soft, or ideally a softer-than-expected CPI read today should give an additional boost to the equity bulls...A stronger inflation reading, on the other hand, could easily bring the Fed hawks back to the marketplace,’ explained Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
According to the CME FedWatch Tool, a 25 basis point hike is expected at the US central bank’s March meeting, with only 15% of the market anticipating a larger 50 basis point hike.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.2%, and the Nasdaq Composite up 0.4%. The dollar, meanwhile, was softer ahead of the inflation print.
The pound was quoted at $1.2199 at midday on Tuesday in London, higher compared to $1.2133 at the close on Monday. Against the yen, the dollar was trading at JP¥132.24, lower compared to JP¥132.77.
In London, Coca-Cola HBC remained the best blue-chip performer at midday, up 6.1%.
The soft-drink bottling company reported net sales revenue of €9.20 billion, up 28% from €7.17 billion a year ago, despite a ‘challenging backdrop’ according to Chief Executive Zoran Bogdanovic.
Pretax profit, however, was €623.6 million, down from £734.9 million a year earlier. The company explained this was mainly due to impairment charges relating to its operations in Russia.
Vodafone climbed 3.8%. Late on Monday, Liberty Global said it acquired a 4.9% stake in the telecommunications firm, believing it to be undervalued.
Liberty Global bought 1.33 billion shares in Vodafone. At current market prices, the stake purchased by Liberty Global is worth £1.22 billion.
Liberty Global added it was not considering an offer for Vodafone.
Flutter Entertainment rose 1.4%, as the Sky Bet and Paddy Power-owner said it is considering an additional US listing amid growing success of its US-based sports betting company Fan Duel.
New York-based FanDuel, which offers horse racing and an online casino, is set to become Flutter’s largest business by revenue and a greater proportion of its value.
Flutter said it expects shareholder consultations to start immediately before deciding whether to put forward a formal resolution for approval.
It added: ‘In the event that there is broad shareholder support for an additional US listing, this would take precedence over any plans to list a small shareholding in FanDuel.’
In the FTSE 250, easyJet was the top performer, up 4.5% at 491.40 pence at midday, after Deutsche Bank double-upgraded the airline to ’buy’ from ’sell’ with a price target of 580p.
Travel peer Tui rose 1.3% as its first quarter loss narrowed, amid a climb in revenue on the back of higher travel demand, helped by eased Covid restrictions.
Tui company reported a pretax loss of €272.6 million, narrowed from €404.5 million a year ago. Revenue jumped 58% to €3.75 billion from €2.37 billion.
Elsewhere in London, Amigo Holdings surged 28% as the lender avoided a £72.9 million fine from the UK Financial Conduct Authority on the grounds it would cause serious financial hardship.
‘A fine would also have threatened Amigo’s ability to meet its commitments to a High Court-sanctioned scheme of arrangement, which aims to pay redress to customers,’ the FCA explained.
The company noted that this marks an ‘important milestone’ for the company, as it brings the legacy issues to a close.
Chief Executive Officer Danny Malone said: ‘I would like to apologise again to any customers impacted for the past failings in lending practises that occurred during the period 2018-2020.’
The financial regulator explained that between November 1, 2018, and March 31, 2020, Amigo did not have appropriate processes in place to ensure it adequately assessed borrower and guarantor circumstances before approving a loan. This led to a ‘high risk of consumer harm, both to borrowers and guarantors,’ it said.
In European equities on Tuesday, the CAC 40 index in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.4%.
Fresh data showed that economic growth in the eurozone slowed in the final quarter of 2022, though the single currency zone’s economy narrowly avoided contraction.
According to a flash estimate from Eurostat, gross domestic product in the eurozone grew by 0.1% in the fourth quarter from the third. This represents a slowing from 0.3% growth seen in the third quarter from the second.
Franziska Palmas at Capital Economics said that, despite Tuesday’s positive print, she expects things will get worse this year for the eurozone, anticipating a recession in the first half of 2023.
‘Confirmation that euro-zone GDP growth slowed to a crawl in Q4 does not alter our view that the region is now falling into recession,’ she said.
Following the eurozone data and ahead of the US inflation report, the euro was stronger against the dollar.
The euro stood at $1.0758 around midday on Tuesday, higher against $1.0718 at the London equities close on Monday.
Brent oil was quoted at $85.35 a barrel at midday in London on Tuesday, down from $85.82 late Monday. Gold was quoted at $1,856.77 an ounce, higher against $1,853.05.
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