The pound fell back toward the $1.20 level early Wednesday after official figures showed that UK price inflation slow by slightly more than expected last month.
Sterling suffered from the hint of reduced pressure on the Bank of England to keep raising UK interest rates.
The pound was quoted at $1.2086 at early on Wednesday in London, compared to $1.2174 at the equities close on Tuesday.
London stock prices were mixed. The FTSE 100 index was down 5.70 points, or 0.1%, at 7,948.15 early Wednesday. However, the FTSE 250 was up 7.99 points at 20,026.22. The AIM All-Share was down 1.19 points, or 0.1%, at 866.11.
The Cboe UK 100 was down 0.3% at 795.17, the Cboe UK 250 was down 0.1% at 17,456.76, and the Cboe Small Companies was down 0.3% at 13928.28.
On an annual basis, the consumer price index eased to 10.1% in January from 10.5% in December, figures from the Office for National Statistics showed.
Consensus had expected inflation to cool to 10.3%, according to FXStreet.
On a monthly basis, UK consumer prices fell by 0.6%, compared to a 0.4% rise in December. The decline was slightly more than market expectations. Month-on-month inflation was forecast to be negative 0.4% in January.
Core inflation - excluding energy, food, alcohol, and tobacco - cooled to 5.8% in January on an annual basis, from 6.3% in December.
Giles Coghlan, chief market analyst at HYCM said: ‘Although today’s modest decline in inflation shows that CPI is slowly heading in the right direction, the strength of UK wage growth remains a key concern to Bank of England policymakers, who are likely to have at least one more interest rate hike to go.’
On Tuesday the ONS said annual growth in average total pay, including bonuses, was 5.9%. Excluding bonuses, it was 6.7%. In September to November, annual growth in average total pay, including bonuses, and in regular pay, excluding bonuses, both were 6.4%.
Lloyds Bank said Tuesday’s report showed conditions in the UK labour market were still tight enough to concern the Bank of England that domestic inflationary pressures may not be easing enough to allow for inflation to fall back to its 2.0% target.
Commented Matthew Ryan, head of market strategy at financial services firm Ebury: ‘Sterling has sold-off across the board in response to this morning’s data. While the risk of a sharp recession may have lessened, the easing in price pressures may persuade the Bank of England to take a slightly less hawkish approach at upcoming [Monetary Policy Committee] meetings.’
Added James Richard Sproule, UK chief economist at Handelsbanken: ‘For the moment, our forecast remains that interest rates have reached their peak at 4%, and while we acknowledge markets expect that interest rates will rise by 25bp in March, markets also expect this rise to be reversed by year end.’
In London, Coca-Cola HBC was the the best blue-chip performer in early morning trade, up 1.9% after finishing 5.0% higher on Tuesday.
The soft drink bottler on Tuesday posted revenue of €9.20 billion for 2022, climbing 28% from €7.17 billion, though pretax profit declined 15% to €623.6 million from €734.9 million.
Hargreaves Lansdown rose 0.5% as it reported a fall in managed assets over the course of its financial first half, but revenue and profit surged.
The retail investment platform reported that revenue in the six months ended December 31 jumped 20% to £350.0 million from £291.1 million a year ago. Pretax profit surged 31% to £197.6 million from £151.2 million.
Hargreaves ended the six-month period with £127.1 billion in total assets under administration, sliding 10% from £141.2 billion at the same point the year prior. However, this marks a slight improvement from £123.8 billion at June 30, the end of financial year 2022.
Barclays was the worst performer in the FTSE 100, down 8.3%. The bank reported a fall in annual profit as a result of higher credit impairments, citing deteriorating economic forecasts.
Barclays posted pretax profit of £7.01 billion for 2022, down 14% from £8.19 billion in 2021. It booked credit impairment charges of $1.22 billion in the year, compared to credit impairment releases of £653 million in 2021.
Chief Executive CS Venkatakrishnan said: ‘Barclays performed strongly in 2022. Each business delivered income growth, with group income up 14%. We achieved our [return on tangible equity] target of over 10%, maintained a strong common equity tier 1 capital ratio of 13.9%, and returned capital to shareholders. We are cautious about global economic conditions, but continue to see growth opportunities across our businesses through 2023.’
Glencore was down 1.3% despite reporting a solid performance in 2022 thanks to ‘unprecedented developments’ in global energy markets which acted as ‘material drivers’ for both its marketing and industrial businesses.
The miner and commodities trader posted revenue totalling $255.98 billion in the year, up 26% from $203.75 billion the year prior. Adjusted earnings before interest, tax, depreciation and amortisation came in at $34.10 billion, up 60% from $21.32 billion. Pretax profit surged to $22.88 billion in 2022 from $7.38 billion in 2021.
In the FTSE 250, Dunelm rose 0.8% as it backed its full-year guidance, despite reporting a 17% drop in profit.
In the six months ended December 31, Dunelm reported a 5.0% increase in total sales to £835.0 million from £795.6 million a year ago. However, pretax profit for the soft furnishings retailer fell by 17% to £117.4 million from £140.8 million.
Dunelm said this fall was expected, reflecting impact of sale timing and strong post-pandemic demand in the prior year, as well as inflationary impacts.
Looking ahead, Dunelm reiterated its full-year guidance, saying that it is on track to deliver full-year results in line with analyst expectations.
The current company compiled consensus average of analyst expectations for financial 2023 pretax profit is £176 million, with a range of £131 million to £188 million. Pretax profit in financial year 2022 came in at £212.8 million.
In European equities on Wednesday, the CAC 40 index in Paris and the DAX 40 in Frankfurt was were both up 0.2%.
The euro stood at $1.0719 early on Wednesday, lower against $1.0731 at the London equities close on Tuesday. Against the yen, the dollar was trading at JP¥133.26, higher compared to JP¥132.77.
In Asia on Wednesday, stocks closed in the red. The Nikkei 225 index in Tokyo closed down 0.4%. In China, the Shanghai Composite closed down 0.4%, while the Hang Seng index in Hong Kong finished 1.4% lower. The S&P/ASX 200 in Sydney closed down 1.1%.
In the US on Tuesday, Wall Street ended mixed. The Dow Jones Industrial Average closed down 0.5%, the S&P 500 ended marginally lower, and the Nasdaq Composite closed up 0.6%.
Brent oil was quoted at $84.50 a barrel at early in London on Wednesday, down from $85.67 late Tuesday. Gold was quoted at $1,835.44 an ounce, sharply lower against $1,852.49.
Still to come on Wednesday’s economic calendar, the US will release retail sales data at 1330 GMT.
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