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London open: Stocks gain as inflation hits new 30-year high; Spring Statement eyed
London stocks edged higher in early trade on Wednesday following positive US and Asian sessions, as investors mulled the latest UK inflation data and looked ahead to the Spring Statement.
At 0830 GMT, the FTSE 100 was up 0.3% at 7,495.02, while sterling was 0.2% weaker against the dollar at 1.3237.
Figures released earlier by the Office for National Statistics showed that inflation hit a new 30-year high in February as the cost of living crisis intensified.
In the 12 months to February, consumer prices rose by 6.2% amid surging energy and fuel costs, up from 5.5% in January and marking the highest inflation reading since March 1992. Analysts had been expecting 6%.
On a month-on-month basis, prices were up 0.8%, which was the biggest monthly CPI jump between January and February since 2009.
Meanwhile, the retail price index came in at 31-year high of 8.2%.
The latest inflation reading comes ahead of Chancellor Rishi Sunak’s Spring Statement, in which he is expected to cut fuel duty by 5p a litre and raise the threshold for national insurance.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Some measures to relieve the pain are expected to be administered in the UK, by Chancellor Rishi Sunak later in his Spring Statement, and these are likely to be targeted at the lowest earners, who bear the brunt of commodity prices rises.
“The bulk of the increase in costs for consumers in the inflation snapshot came from higher energy bills and fuel prices, and there is no immediate end to that financial pain in sight with crude oil staying elevated, with Brent crude above $116 a barrel. However, a lid is being kept on gains for now with talks on trying to achieve an end to the devastating conflict in Ukraine, appearing to still be moving forward.
“It may be slow, step by step progress, according to Ukrainian President Zelensky, but any kind of improvement in the chances of a ceasefire is being welcomed by investors. Equity markets have risen with sentiment largely sanguine in the midst of the geopolitical turmoil, with the FTSE 100 rising on the open.”
On the corporate front, oil giant BP was a high riser after an upgrade to ‘overweight’ at Morgan Stanley, while Watches of Switzerland gained after an initiation at ‘buy’ at Societe Generale.
Elsewhere, safety equipment company Halma was trading up after saying it had made “good progress” so far in the second half of its trading year.
UK defence company Ultra Electronics ticked lower even as it reported a rise in annual profits as it awaits a UK government decision on whether US buyout specialist Advent can take over the firm.
Reckitt Benckiser was under the cosh after a downgrade to ‘underperform’ at Jefferies, while Beazley fell after a downgrade to ‘hold’ at HSBC.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bp Plc | +3.37% | +12.50 | 383.80 |
| 2 |  |
Shell Plc | +3.01% | +60.50 | 2,068.00 |
| 3 |  |
Ocado Group Plc | +2.16% | +23.50 | 1,109.50 |
| 4 |  |
Burberry Group Plc | +1.56% | +26.50 | 1,726.50 |
| 5 |  |
Bhp Group Limited | +1.52% | +40.50 | 2,707.50 |
| 6 |  |
Halma Plc | +1.27% | +32.00 | 2,548.00 |
| 7 |  |
Ashtead Group Plc | +1.23% | +66.00 | 5,438.00 |
| 8 |  |
Sage Group Plc | +1.13% | +7.80 | 698.60 |
| 9 |  |
Ferguson Plc | +1.12% | +125.00 | 11,285.00 |
| 10 |  |
Diageo Plc | +1.08% | +40.50 | 3,783.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Standard Chartered Plc | -1.58% | -8.20 | 511.00 |
| 2 |  |
Persimmon Plc | -1.31% | -30.00 | 2,253.00 |
| 3 |  |
Wpp Plc | -1.21% | -13.00 | 1,059.00 |
| 4 |  |
Kingfisher Plc | -1.14% | -3.10 | 269.80 |
| 5 |  |
Hsbc Holdings Plc | -1.12% | -5.80 | 510.80 |
| 6 |  |
Itv Plc | -0.96% | -0.80 | 82.20 |
| 7 |  |
Barratt Developments Plc | -0.89% | -5.00 | 554.60 |
| 8 |  |
Land Securities Group Plc | -0.87% | -6.80 | 772.40 |
| 9 |  |
Taylor Wimpey Plc | -0.83% | -1.20 | 143.05 |
| 10 |  |
International Consolidated Airlines Group S.a. | -0.82% | -1.16 | 140.86 |
Europe open: Shares edge ahead as investors digest UK inflation data
European shares were flat-to-slightly-higher at the open on Wednesday as investors monitored the war in Ukraine and digested the latest soaring UK inflation numbers.
The pan-European Stoxx 600 index was up 0.06% in early deals, with energy stocks in demand as fears of oil supply disruption from the Russia-Ukraine conflict helped keep commodity prices higher. BP, Shell and Repsol shares were all higher on the news.
Ukraine President Volodymyr Zelenskiyy said talks with Russia were still moving forward as his country continued to suffer shelling in several cities and the humanitarian crisis began to look increasingly desperate.
In the UK, official figures showed February inflation hit 6.2% as prices soared again and placed British households under more pressure. Image-conscious millionaire Finance Minister Rishi Sunak is in the spotlight later on Wednesday when he presents his Spring statement to parliament.
“The UK inflation reading for February is a bit like testing the temperature of a hot bath before a few more kettles of boiling water are poured in,” said Hargreaves Lansdown analyst Susannah Streeter.
“This is before the commodity chaos unleashed by the invasion of Ukraine fully shows up in the figures, so the expectation is that with inflation becoming hotter, the Bank of England will try and turn on the cold taps by raising rates more assertively.”
Markets.com chief analyst Neil Wilson was more pointed in his assessment of what to expect from Sunak, saying he had a “difficult job to ease things, if he were to be so inclined” with the Spring statement.
“We don’t really know if he cares that much. Millionaires married to billionaires are not ‘men of the people’ and have little feel for what it’s like to be poor,” he said.
“They don’t get that a few hundred pounds could make all the difference – abandoning the NI rise would be the best strategy, whilst Universal Credit must surely rise. He has an extra £35bn to play with and the jump in inflation underscores the urgency to act. The Spring Statement is not the Budget, but it’s a set-piece event for the chancellor and the cost-of-living crisis is upon us now.”
In equity news, shares in Auto1 Group fell 6% despite reporting higher full-year profits.
US close: Stocks close higher as investors digest rate hike comments
Wall Street closed higher on Tuesday as market participants digested comments from Federal Reserve chairman Jerome Powell regarding rate hikes.
At the close, the Dow Jones Industrial Average was up 0.74% at 34,807.46, while the S&P 500 was 1.13% firmer at 4,511.61 and the Nasdaq Composite saw out the session 1.95% stronger at 14,108.82.
The Dow closed 254.47 points higher on Tuesday, reversing losses recorded in the previous session amid the ongoing Russia-Ukraine conflict and the crash of a passenger plane in China.
Comments from the Fed chair from a day earlier were still on focus on Tuesday, with Powell potentially opening the door for the central bank to take a more aggressive monetary policy stance moving forward. Powell stated the Fed must move “expeditiously” to bring too-high inflation under control, adding it will, if needed, use bigger-than-usual interest rate hikes to do so.
Commodity prices were also drawing an amount of investor attention, with Brent futures easing off after surging on Monday on the back of news that the European Union was mulling over the idea of banning Russian oil, while the yield on the benchmark 10-year Treasury note hit a high of 2.39% in the session – its highest level since May 2019.
Investors also still closely watched the conflict in Eastern Europe, with president Joe Biden stating Russian president Vladimir Putin’s back was “against the wall” as his war with Ukraine nears a stalemate.
On the macro front, the Richmond Fed composite manufacturing index increased to 13 in March, a marked improvement when compared to February’s reading of 1, pointing to an improvement in Fifth District manufacturing activity as increases were seen in all components.
In the corporate space, Nike shares were in the green after the retailer posted third-quarter earnings that beat on both the top and bottom line thanks to solid demand in North America, while Carnival shares were down after posting disappointing quarterly sales as a spike in Covid-19 cases impacted demand.
Wednesday newspaper round-up: Spring Statement, Abramovich, P&O Ferries
Rishi Sunak will promise “security” to cash-strapped families as he announces a fresh package of measures to tackle the cost of living crisis on Wednesday, but will continue to underline the importance of fixing the public finances. The chancellor has been under intense pressure to take action to help households with the rocketing cost of fuel and other essentials. The financial expert Martin Lewis told MPs on Tuesday that many households are facing a “fiscal punch in the face” when the energy price cap rises next month. – Guardian
US authorities appear closer to adding Roman Abramovich to their list of sanctioned hyper-rich Russians, after reports surfaced of a complex transaction of funds through a US hedge fund that was linked to the UK- and European-sanctioned owner of Chelsea football club. Abramovich, reputedly the one-time steward on Boris Yeltsin’s plane, and tapped by the then up-and-coming Vladimir Putin to manage Russian state-owned energy assets, was reported by the New York Times on Monday to be behind a $20m transfer from a shell company registered in the British Virgin Islands to an investment vehicle in the Cayman Islands controlled by a US hedge fund. – Guardian
P&O Ferries has insisted it did not break the law by sacking nearly 800 seafarers without prior consultation. In a letter to Kwasi Kwarteng, the Business Secretary, P&O’s chief executive denied claims that it ordered taser-trained security guards to remove workers from their posts. – Telegraph
The housebuilding industry has written to Michael Gove after the housing secretary described leading developers as a “cartel” and criticised their approach to protecting the environment. Speaking to the Conservative Environment Network recently, Gove said he is “not particularly popular with developers” at the moment given that he is pushing them to spend billions fixing the nation’s dangerous cladding. – The Times
A top official at the Bank of England has cautioned that the “jury is still out” on the number of City of London banking jobs that may ultimately be lost to the European Union following Brexit. Sam Woods, a deputy governor who leads the Bank’s Prudential Regulation Authority (PRA) arm, told the House of Lords European affairs committee yesterday that the movement of bankers to the Continent had been “manageable” but had not been a “non-event”. – The Times
