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ADVFN Morning London Market Report: Wednesday 14 February 2024

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London open: Stocks gain as inflation holds steady

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London stocks rose in early trade on Wednesday as data showed that UK inflation was steady in January, taking pressure off the Bank of England to keep rates higher for longer.

At 0835 GMT, the FTSE 100 was up 0.5% at 7,547.57.

Figures released earlier by the Office for National Statistics showed the consumer price index rose 4% in the 12 months to January, unchanged on December. Analysts had been expecting a rise to 4.2%.

The ONS said food prices fell on the month for the first time in over two years. Furniture and household goods prices also decreased, though that was partly offset by higher gas and electricity charges and second-hand car prices, which went up for the first time since May.

On a monthly basis, CPI eased 0.6%.

Including owner occupiers’ housing costs, inflation was 4.2%, also unchanged on December.

Core inflation, which strips out the more volatile elements of food, alcohol and energy, was steady at 5.1%.

“It’s not unusual when inflation is falling to see these kind of pauses,” Grant Fitzner, chief economist at the ONS, told the BBC.

The Bank of England hiked the cost of borrowing throughout 2022 and into 2023, as it looked to tackle surging inflation.

While inflation is now well below a peak of 11.1%, reached in October 2022, it remains above the BoE’s long-term target of 2%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Bank of England policymakers are a very wary lot and will want more evidence that inflation will hug the target of 2% rather than drift upwards again before they are confident about cutting rates. However, given this slightly better than expected reading, the prospect for rate cuts this year is more encouraging.

“The pound has dipped back by around 0.25%, reflecting this, and was trading around 1.255 against the dollar. The better-than-expected inflation reading has helped push the FTSE 100 into the green in early trade, with a sigh of relief palpable that cuts are on the horizon.”

In equity markets, housebuilders rallied, with Persimmon and Taylor Wimpey among the best performers on the FTSE 100.

Coca-Cola HBC was the standout gainer on the top-flight index, however, after it posted record profits for last year driven by surging sales and volumes for sparkling drinks and coffee combined with costs easing in the second half.

United Utilities and Severn Trent also rose after trading updates.

On the downside, furniture and homewares retailer Dunelm fell even as it lifted its dividend and declared a special payout after a rise in interim profits and sales.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Coca-cola Hbc Ag +5.44% +120.00 2,326.00
2 Persimmon Plc +3.53% +48.00 1,409.50
3 Taylor Wimpey Plc +2.51% +3.55 145.00
4 Vodafone Group Plc +2.42% +1.55 65.70
5 Ocado Group Plc +2.39% +12.40 532.00
6 Gsk Plc +2.20% +36.20 1,678.00
7 Barratt Developments Plc +2.08% +9.70 475.80
8 British Land Company Plc +1.94% +7.10 373.40
9 Rolls-royce Holdings Plc +1.80% +5.50 311.80
10 Tesco Plc +1.79% +4.90 278.60

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Anglo American Plc -3.62% -63.60 1,692.40
2 Tui Ag -2.85% -16.50 562.00
3 Glencore Plc -1.20% -4.70 388.00
4 Fresnillo Plc -1.17% -5.50 466.30
5 Antofagasta Plc -0.72% -12.00 1,649.50
6 Diageo Plc -0.45% -13.00 2,847.50
7 Prudential Plc -0.23% -1.80 789.00
8 Standard Chartered Plc -0.21% -1.20 576.40
9 Bp Plc -0.19% -0.90 478.85
10 Astrazeneca Plc -0.16% -15.00 9,585.00

 

US close: Dow tumbles as inflation tops forecasts

Stocks on Wall Street fell through to the closing bell on Tuesday, with the Dow posting its most significant decline since March last year as investors grappled with a January inflation report that exceeded expectations.

At the close, the Dow Jones Industrial Average was down 1.35%, closing at 38,272.75 points, while the S&P 500 saw a decline of 1.37%, ending the day at 4,953.17 points.

The tech-heavy Nasdaq Composite faced the most substantial setback, dropping 1.8% to settle at 15,655.60 points by the end of the trading session.

In currency markets, the dollar was last 0.03% stronger on sterling to trade at 79.43p, while it remained stable against the common currency at 93.38 euro cents, and decreased 0.11% on the yen, changing hands at JPY 150.63.

“On Tuesday, world stock market indexes dropped like hot potatoes, the US dollar surged to three-month peaks, and Treasury yields climbed the ladder after consumer prices in the United States came in at a much brisker-than-expected rate in January,” said SPI Asset Management managing partner Stephen Innes.

“The harsh data set surprised many investors, serving as a stark reminder of the persistent inflationary pressures in the economy.

“This came as a bitter pill for those who may have interpreted the relatively benign annual inflation revisions released last week as something akin to an all-clear.”

Hot consumer inflation sours hopes for a rate cut

At the top of the agenda was fresh data from the Bureau of Labor Statistics, which revealed that inflation surged at a faster pace than anticipated in January, driven largely by escalating shelter prices.

The US consumer price index (CPI) climbed 3.1% year-on-year, reaching 308.417, marking a slight moderation from December’s 3.4% increase but surpassing market projections of a 2.9% uptick.

On a monthly basis, headline inflation rose by 0.3%, outpacing expectations of a 0.2% rise.

Excluding volatile food and energy prices, core CPI experienced a 0.4% uptick last month and stood at 3.9% higher than the previous year.

Forecasts had predicted a 0.3% increase and a 3.7% year-on-year rise, respectively.

Shelter prices, constituting about one-third of the CPI weight, emerged as the primary driver of the increase, surging by 0.6% in January and contributing over two-thirds of the headline rise.

Meanwhile, food prices also saw an uptick, rising by 0.4% during the month.

Conversely, energy prices experienced a decline, offsetting increases elsewhere, with a notable 0.9% drop, primarily attributed to a 3.3% decrease in gas prices.

“January consumer price inflation falling less than expected was enough of a catalyst to cut the equity rally short, push yields and the US dollar to two-month highs,” said IG senior market analyst Axel Rudolph.

“Hopes for a Fed March rate cut have all but disappeared with the market now pricing in a 53% probability of a first cut being seen in June.”

Avis Budget tumbles on earnings, JetBlue springs higher

In equity markets, Avis Budget Group tumbled 22.9% after the car rental giant reported disappointing fourth-quarter results.

The Coca-Cola Company saw a slight decrease of 0.59% despite posting quarterly sales that exceeded estimates, driven by higher prices.

Toy giant Hasbro slid 1.35% after its earnings fell short of estimates, while its forward guidance disappointed investors.

Similarly, hotel chain Marriott International missed revenue expectations despite beating earnings estimates in its latest quarterly report, sending its shares 5.59% lower.

On the upside, JetBlue Airways spiked 21.58% after activist investor Carl Icahn revealed a near-10% stake in the company.

Icahn described JetBlue’s stock as undervalued, as the airline grappled with profitability challenges and after its proposed merger with Spirit Airlines was blocked by federal regulators.

 

Wednesday newspaper round-up: Lyft, Hinkley, Waitrose, BAT

UK shop workers are facing 1,300 incidents of violence and abuse a day and a battle to control “brazen” acts of shoplifting, as pressure mounts on ministers to intervene to protect retail employees. Retailers saw the number of incidents of racial abuse, sexual harassment, physical assaults and threats with weapons rise 50% last year, while thefts more than doubled to 16.7m incidents, according to the British Retail Consortium (BRC), the trade body which represents most major retailers. – Guardian

Lyft beat estimates for fourth-quarter profits on Tuesday and said it would generate positive free cashflow for the first time in 2024, as the ride-share platform reaps the benefits of heavy cost-cutting. Company shares surged nearly 60% in extended trading but erased a third of those gains after Lyft’s chief financial officer corrected a major mistake in the earnings report. Erin Brewer had said that the company would grow by 500 basis points (5%) in 2024, but later said that the real increase would be a factor of 10 lower – 50 basis points (0.5%). In 2023, the stock gained about 36%. – Guardian

British taxpayers have been asked to stump up cash to fund nuclear power plants being built in the UK by the French energy giant EDF. Bruno Le Maire, France’s finance minister, said on Tuesday he would be asking Jeremy Hunt for “an equitable sharing of costs” for the power stations which include Hinkley Point C, in Somerset, and Sizewell C, in Suffolk. – Telegraph

Waitrose is to cut hundreds of prices as the retailer battles against Marks & Spencer for Britain’s middle class shoppers. The supermarket said on Wednesday it would invest £30m into lowering the price of swathes of its own-brand products. Waitrose’s price cuts will span 200 items across meat, fruit and vegetables, as well as kitchen cupboard staples. The retailer promised a further round of price cuts in the spring. – Telegraph

British American Tobacco has retained “call” options to reacquire its Russian and Belarusian businesses, it has emerged. The owner of Lucky Strike and Dunhill cigarettes agreed to sell the businesses in September, 18 months after it had committed to doing so in the wake of Moscow’s invasion of Ukraine. However, BAT did not disclose at the time that it had retained the option to buy them back. – The Times

 

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