Stock prices in London sparkled at midday on Wednesday, as investors cheered UK inflation coming down faster than anticipated.
The FTSE 100 index was up 44.63 points, 0.6%, at 7,682.66. The FTSE 250 was up 126.06 points, 0.7%, at 19,442.04, and the AIM All-Share was up 2.92 points, 0.4%, at 748.31.
The Cboe UK 100 was up 0.5% at 766.92, the Cboe UK 250 was up 0.7% at 16,922.53, and the Cboe Small Companies was up 0.5% at 14,490.13.
UK consumer price inflation cooled faster than expected last month, according to data from the Office for National Statistics.
The ONS said the consumer price index rose 3.9% annually in November, cooling sharply from the 4.6% increase recorded in October. The inflation reading came in below FXStreet-cited market consensus of 4.4%.
The recent peak for annual inflation in the UK was 11.1% in October 2022, which the ONS estimated to be the highest since 1981. November’s reading was the lowest since September 2021.
‘Considerably lower than expected inflation figures have put a rocket under the UK stock market as investors take the view the Bank of England will have no choice but to cut rates soon,’ said Russ Mould, investment director at AJ Bell.
Last week, the Bank of England kept bank rate at the historically high level of 5.25%, with some of its policymakers even voting in favour of a further 25 basis point hike.
According to Trading Economics forecasts, investors are now pricing in a 25 basis point rate cut in the second quarter of next year, with another to follow in the third quarter.
Mould commented: ‘The Bank of England has been pushing up rates to fight inflation but now faces a situation where rates look too high and cuts could come too late to avoid an economic slump. On the other hand, issues in the Red Sea threaten supply chains and have pushed up the oil price, both drivers for inflation. Therefore, this is a somewhat muddy situation.’
In European equities on Wednesday, the CAC 40 in Paris was up 0.1%, but the DAX 40 in Frankfurt lost 0.1%.
The decline in German producer prices continued in November, but slowed somewhat annually, according to Destatis.
Annually, Germany’s producer price index fell by 7.9% in November, slowing from an 11% drop in October. According to FXStreet, markets were expecting a 7.5% fall.
In September, Destatis recorded a 15% drop in annual producer prices, which was the largest annual decline since data collection began in 1949.
The pound was quoted at $1.2656 at midday on Wednesday in London, down markedly compared to $1.2734 at the equities close on Tuesday. The euro stood at $1.0941, lower against $1.0972. Against the yen, the dollar was trading at JP¥143.39, lower compared to JP¥143.88.
In the FTSE 100, housebuilders edged slightly higher. Barratt Developments and Taylor Wimpey were both up 0.4%. Berkeley Group edged 0.2% higher.
UK house prices fell at a steeper pace on an annual basis in October, according to government data on Wednesday
The Office for National Statistics said average house prices in the UK fell 1.2% in October from a year before. This was faster than the 0.6% annual fall in September, which was revised downwards from a 0.1% decline.
In England, the average house price fell 1.4% annually to £306,000. In Wales, it fell 3.0% to £214,000; however, in Scotland, it rose 0.2% to £191,000.
Elsewhere in the FTSE 100, DS Smith fell 0.9%. UBS cut DS Smith to ’neutral’ from ’buy’.
In the FTSE 250, Diversified Energy clawed back some Tuesday’s losses, rising by 4.4%. It plummeted 14% on Tuesday.
Diversified, the largest owner of US oil and gas wells in the country, received a letter on Monday from four members of the US House of Representatives Committee on Energy & Commerce.
The letter requested information concerning the company’s well retirement and emissions practices, and expressed concerns over the company’s purchase of ‘a substantial share of the country’s ageing oil and gas wells.’
In response, on Tuesday, Diversified said: ‘the company is reviewing the letter and intends to engage in a positive and open manner, as it has continuously done, by providing information regarding the company’s peer-leading environmental and operational actions that underpin its responsible asset stewardship approach.’
Specialty pharmaceutical firm Indivior added 2.8%, as it settled a patent dispute with Teva subsidiary Actavis concerning the latter’s abbreviated new drug application for generic buprenorphine and naloxone sublingual film.
Among London’s small-caps, Petrofac rocketed 39%.
The energy infrastructure firm announced said it has seen ‘exceptional’ new order intake across Engineering & Construction and Asset Solutions, totalling $6.8 billion in 2023 so far. It expects the backlog to be around $8.0 billion by the year.
It announced the second contract award under the six-project $14 billion framework agreement with TenneT, working alongside Hitachi Energy, with Petrofac’s portion of the contract worth around $1.4 billion.
On AIM, Versarien plummeted 42%.
The advanced materials engineering group’s stock hit an all-time low, after the firm updated the market on various developments.
Versarien said asset sales, which are ‘an integral part of its turnaround strategy’, have not progressed as expected, and guides for a weaker performance in the year ended September 30, than the 18-month period prior to that.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.3%.
Brent oil was quoted at $80.08 a barrel at midday in London on Wednesday, up from $78.81 late Tuesday. Gold was quoted at $2,033.28 an ounce, lower against $2,039.44.
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