A more favourable than feared UK inflation reading bolstered London-listed equities heading into Wednesday afternoon, as stocks recovered from a red-hot US consumer price index print on Tuesday.
Housebuilders were particular beneficiaries, on hopes the Bank of England can begin cutting rates soon. The yearly inflation rate in the UK is still running at double the Bank of England’s 2% target, however.
The FTSE 100 index traded 62.09 points higher, 0.8%, at 7,574.37. The FTSE 250 was up 137.78 points, 0.7%, at 19,061.61, and the AIM All-Share was 1.98 points higher, 0.3%, at 749.22.
The Cboe UK 100 was up 0.9% at 757.48, the Cboe UK 250 was surged 1.0% to 16,504.41, and the Cboe Small Companies was 0.3% higher at 14,408.19.
In Paris, the CAC 40 was up 0.5%. Frankfurt’s DAX 40 was 0.2% higher.
In New York, the Dow Jones Industrial Average is called 0.1% higher, the S&P 500 0.3% higher the Nasdaq Composite up 0.5%.
It would represent a recovery for Wall Street equities, after they struggled on Tuesday following a hotter-than-expected US inflation reading.
‘However, today it was the turn of the UK to highlight their more realistic pathway back down to target, with a 0.6% decline on monthly CPI lifting hope that we will soon see the headline inflation gauge head back down towards target,’ Scope Markets analyst Joshua Mahony commented.
‘Those hoping for a dovish pivot from the Bank of England need not wait too long, with markets increasingly betting that we will see the bank embark upon a series of rate cuts from June. However, with headline CPI currently on a pathway that could see it fall well beyond the 2% target, there is a strong chance that we see the bank move as early as May. For the pound, this is bad news, with the sharp declines seen today serving to highlight the potential downward trajectory that could play out as we see inflation tumble back down towards target in the coming months.’
The UK’s annual inflation rate was steady last month, defying expectations of an acceleration, numbers showed.
According to the Office for National Statistics, the rate of annual consumer price inflation was unmoved at 4.0% in January, where it had stood in December.
It had been expected to pick up to 4.2%, according to FXStreet cited consensus.
Consumer prices declined 0.6% in January from December. They had been expected to decline at a lesser monthly pace of 0.3%, according to FXStreet. Prices had risen 0.4% in December from November.
Eyes will be on BoE Governor Andrew Bailey, who speaks at 1500 GMT.
The pound struggled after the inflation data, buying $1.2549 early Wednesday afternoon, declining from $1.2596 late Tuesday.
The pound fell but interest rate sensitive stocks rose. Housebuilder Persimmon added 4.0%, while DIY products retailer Grafton climbed 3.0%.
The next Bank of England decision is on March 21. There will be another consumer price index reading a day prior to that decision for Threadneedle Street to digest.
The euro stood at $1.0704 early Wednesday afternoon, down against $1.0716 on Tuesday. Against the yen, the dollar was trading at JP¥150.57, down from JP¥150.66.
In London, Coca-Cola HBC shares surged 7.4% as it beat on annual organic growth.
The soft drink bottling firm, which operates in nations including Cyprus, Greece and Italy, said net sales revenue surged 11% in 2023 to €10.18 billion, from €9.20 billion in 2022. Net sales fell shy of the Vuma cited consensus of €10.25 billion.
Pretax profit shot up 46% to €910.3 million from €623.6 million, but was shy of consensus of €976.3 million.
Organic revenue in 2023 jumped 17%, ahead of consensus of a 16% surge, however.
Coca-Cola HBC proposed an ordinary 2023 dividend of €0.93 per share, up 19% from 2022. It had launched a €400 million two-year share buyback programme in November.
For 2024, it targets organic revenue growth in its 6% to 7% medium-term target range.
Dunelm Group shares fell 0.9%. The Leicester, England-based homeware retailer said revenue rose 4.5% to £872.5 million in the six months to December 30, from £835.0 million a year prior.
Pretax profit was up 4.8% to £123.0 million from £117.4 million over the same period.
Dunelm achieved a gross margin of 53% in the period, up from 51%, and credits this to its ‘tight commercial grip and disciplined approach to promotional activity’.
As a result of its confidence in the business, Dunelm has declared an interim dividend of 16p per share, ahead of last year’s 15p dividend.
Further, the company declared a special dividend of 35p, down 13% from 40p a year prior.
Looking ahead to the full year ending June 29, Dunelm said that it remains on track to deliver pretax profit in line with market expectations at £202 million.
Edison analyst Russell Pointon commented: ‘The company’s commentary on continued market share gains due to growth in new customers and greater frequency of visits by existing customers is very encouraging.
Like most durable goods providers, Dunelm Group has of course been affected by a tough macroecomomic backdrop and some inflationary pressures in the cost base, but these results show the first increase in gross margin since H122’s results, ie two years ago. Market share gains including strong performance in online sales, has allowed Dunelm Group to achieve good growth in what has been a difficult consumer market.’
Bloomsbury Publishing shares rose 8.1%. It expects annual results to be ‘significantly ahead of upgraded market expectations’.
The publisher noted that consensus for the year ending February 29 stands at £291.4 million for revenue, and £37.2 million for pretax profit before ‘highlighted items’. It would represent growth of 10% for revenue and 20% for profit.
‘I am overjoyed to report an exceptionally strong period of trading, principally driven by the increasing demand for fantasy fiction,’ Chief Executive Nigel Newton said.
Brent oil was quoted at $82.63 a barrel midday Wednesday, down from $82.93 at the time of the European equities close on Tuesday.
Gold sank further below the $2,000 an ounce mark. Gold was quoted at $1,991.57 an ounce, down from $1,995.88.
Copyright 2024 Alliance News Ltd. All Rights Reserved.
