London’s FTSE 100 topped the 8,000 point mark for the first-time on Wednesday, during strong afternoon trading for European equities, though investors in New York still had inflationary worries on their minds.
A weaker pound, in the wake of cooling UK inflation, bolstered the blue-chip index’s international earners, as well as its retail sector. Hopes that an end to Bank of England rate hikes are on the horizon lifted housebuilders.
Barclays was the glaring laggard, meanwhile, on poorly-received annual results.
The FTSE 100 index closed 43.98 higher, 0.6%, at 7,997.83. The large-cap index rose to 8,003.65 points around 1530 GMT.
The FTSE 250 rose 154.36 points, or 0.8%, at 20,172.59. The AIM All-Share closed up 2.23 points, 0.3%, at 869.53.
The Cboe UK 100 closed up 0.4% at 800.78, the Cboe UK 250 rose 0.5% at 17,564.62, though the Cboe Small Companies lost 0.5% to 14,042.20.
In European equities on Wednesday, the CAC 40 in Paris surged 1.2%, while the DAX 40 in Frankfurt closed up 0.8%.
‘It’s redemption day for the FTSE 100 as it breached the 8,000 mark after a long spell in the wilderness. The 8,000 level is a purely psychological milestone, but investors in the UK stock market will nonetheless be happily counting their coffers after a year in which it has been one of the best performing major markets. Pension and ISA valuations will be looking pretty healthy thanks to the performance of the FTSE 100 and indeed the continued resurgence in the US stock market since the turn of the year,’ AJ Bell analyst Laith Khalaf commented.
‘This silver lining isn’t entirely shorn of a cloud however, because much of the success of the UK stock market over the last year can be traced back to Russia’s invasion of Ukraine. This helped buoy the share prices of the oil and gas sector, and the financial sector too, as the fight against increased inflation has meant interest rates have also had to rise, boosting bank reserves. A weak pound has also helped propel the Footsie upwards, thanks to all the overseas earnings made by the companies within it. It’s notable that the last calendar year in which the FTSE 100 outperformed the S&P 500 was in 2016, when the pound also took a hammering following the EU referendum. But while a weak pound may be a shot in the arm for the UK stock market, it is also a vote of no confidence in the UK economy.’
Inflation in the UK slowed by slightly more than forecast in January, though remained in double digits, figures from the Office for National Statistics showed.
On an annual basis, the consumer price index eased to 10.1% in January from 10.5% in December. Consensus had expected inflation to cool to 10.3%, according to FXStreet.
Core inflation - excluding energy, food, alcohol, and tobacco - cooled to 5.8% in January on an annual basis, from 6.3% in December.
Housebuilders were supported by the data, amid hope that the Bank of England’s hiking cycle is close to its conclusion. Persimmon ended up 2.9% and Barratt Developments added 1.8%.
The retail sector also got a boost, on the tantalising prospect of a pick-up in consumer spending as inflation eases. Sports Direct owner Frasers climbed 2.6%, while Currys shares closed 3.2% higher.
The inflation data hit sterling and boosted the FTSE 100’s international earners. Tobacco company BAT rose 1.2%, while InterContinental Hotels added 1.7%.
The pound was quoted at $1.2007 at the time of the London equities close on Wednesday, lower compared to $1.2174 at the close on Tuesday.
‘The divergence in inflation figures, relative to expectations, on either side of the Atlantic did result in weakness for the pound. This in turn helped provide support to the FTSE 100 by boosting the relative value of its dominant overseas earnings,’ AJ Bell analyst Russ Mould commented.
The euro stood at $1.0669 late Wednesday, lower against $1.0731 at the London equities close on Tuesday. Against the yen, the dollar was trading at JP¥134.32, higher compared to JP¥132.77.
The dollar had struggled shortly after Tuesday’s US inflation release, with the pound climbing close to $1.23 and the euro trading above $1.08. The greenback gathered poise late in Europe on Tuesday and during the New York trading session, however.
Also supporting the dollar was a rise in retail sales last month, according to an advance estimate from the US Census Bureau on Wednesday.
US retail and food service sales totalled $697.0 billion when adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.
This was up 3.0% from December’s revised figure of $676.9 billion, and up 6.4% from January 2022.
Market consensus, according to FXStreet, had expected a monthly rise of just 1.8% in January.
US stocks were lower at the time of the closing bell in London. The Dow Jones Industrial Average was down 0.4%, the S&P 500 was 0.3% lower and the Nasdaq Composite was flat.
On a day when the FTSE 100 hit a milestone, Barclays suffered. The stock closed down 7.9% on weaker annual profit, a tough outlook for its investment bank and a smaller-than-expected buyback.
The company’s annual profit was hurt by ‘litigation and conduct’ charges amounting to £1.60 billion. These amounted to just £397 million in 2021. Roughly a billion of 2022’s hit stemmed from an over-issue of securities.
For 2022, the London-based bank posted pretax profit of £7.01 billion, down 14% from £8.19 billion the previous year. Pretax profit fell short of company-compiled consensus of £7.20 billion.
In the Corporate & Investment Bank, total income rose 8.4% to £13.37 billion in 2022 from £12.33 billion. Pretax profit, however, tumbled 23% to £4.31 billion from £5.63 billion.
AJ Bell’s Mould added: ‘Deals are drying up with regards to mergers and acquisitions and stock market flotations, which means Barclays’ investment banking arm saw profits tumble.’
Finally, it declared a share buyback of up to £500 million, falling short of consensus of £675 million, according to Jefferies. Jefferies itself had expected to see a buyback of £1.0 billion declared.
Elsewhere in London, Brighton Pier lost 11%. The Brighton Palace Pier owner said trading has been in line with market expectations, but it cautioned on the impact of declining UK consumer confidence and rising costs.
Chief Executive Anne Ackord said: ‘Like many in our industry, we have had to absorb higher costs relating to wages, energy prices and other inputs. However, going into 2023, our businesses remain profitable, well managed and backed by a strong balance sheet and asset base.’
Clontarf Energy jumped 47%. It announced an agreement for a potential joint venture with ion extraction technology developer NEXT-ChemX.
Lithium and oil & gas exploration and production firm Clontarf said the agreement would cover testing, marketing and deployment of NCX’s patent pending direct lithium-ion extraction technology in Bolivia.
NCX’s technology mimics biophysical processes to induce ions to cross a membrane barrier, and has proved effective in laboratory testing.
Clontarf said the technology limits energy and water consumption during lithium extraction, and creates minimal waste.
Brent oil was quoted at $84.07 a barrel late Wednesday in London, down from $85.67 late Tuesday. Gold was quoted at $1,832.19 an ounce, sharply lower against $1,852.49.
Thursday’s economic calendar has a US producer price index reading, as well as the latest initial jobless claims number at 1330 GMT. There is consumer price index data from Ireland at 1100 GMT.
The local corporate calendar has annual results from British Gas owner Centrica, lender Standard Chartered and information and analytics firm Relx.
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