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London open: FTSE edges up despite grim inflation data
London stocks edged up in early trade on Wednesday despite rising geopolitical tensions and a grim UK inflation report.
At 0835 GMT, the FTSE 100 was 0.3% firmer at 7,388.76, while sterling was up 0.1% against the dollar at 1.1877.
Geopolitical tensions were in focus following reports that a Russian-made missile had killed two people in NATO member Poland. Russia has denied responsibility for the missile strikes, while US president Joe Biden said it was “unlikely” the missile was fired from Russia.
On home shores, data released earlier by the Office for National Statistics showed that consumer price inflation hit a 41-year high of 11.1% in the year to October as energy bills and food prices surged. This was up from 10.1% in September and versus expectations of 10.7%.
Grant Fitzner, chief economist at the ONS, noted that over the past year, gas prices have climbed nearly 130% while electricity has risen by around 66%.
“Increases across a range of food items also pushed up inflation,” he said. “These were partially offset by motor fuels, where average petrol prices fell on the month, while the price for diesel rose taking the disparity in price between the two fuels to the highest on record.
“There was further evidence that costs facing businesses are rising more slowly, driven by crude oil and petroleum prices.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The jumps in the cost of essentials have been showing up on grocery bills for some time and now it’s made clear with the stark 16.4% rise in food inflation, the highest since 1977.
“It seems we are in a seventies time warp with runaway food prices, public sector strikes crippling services, and worries about energy supplies. The constant march upwards in prices is increasingly painful for consumers and companies, and for now shows little sign of quickly abating.
“This is difficult reading for Bank of England policymakers, as inflation is clearly proving sticker than they forecast. They are now likely to vote for another rise in interest rates at the December meeting, although expectations of another super-size hike still remain lower. So, a rise of 0.5% is on the cards next month with more to come with rates forecast to rise to around 4.5% – 4.75% by the middle of next year.”
In equity markets, software firm Sage surged to the top of the FTSE 100 after full-year revenues beat expectations.
Hill & Smith rallied as the infrastructure provider said annual profits were set to be at the upper end of guidance, driven by strong trading and foreign exchange tailwinds.
Future was boosted by an initiation at ‘overweight’ at JPMorgan.
On the downside, SSE was under the cosh after the UK energy provider said it swung to an interim loss in what it called “unprecedented market volatility” as gas storage earnings amid soaring prices offset weaker earnings from renewables.
British Land was also in the red despite posting a big jump in first-half profits on the back of “strong” rental growth and cost control.
CMC Markets slid even as it reported a rise in first-half net operating income amid increased activity.
Insurer Beazley fell after it raised £350m in a discounted placing to support organic growth and provide growth capital to fund “attractive” underwriting opportunities.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Sage Group Plc | +6.17% | +46.60 | 802.40 |
| 2 |  |
Bae Systems Plc | +3.95% | +29.20 | 767.80 |
| 3 |  |
Experian Plc | +1.96% | +56.00 | 2,907.00 |
| 4 |  |
Imperial Brands Plc | +1.83% | +37.00 | 2,064.00 |
| 5 |  |
Gsk Plc | +1.71% | +23.20 | 1,377.40 |
| 6 |  |
Bp Plc | +1.66% | +7.90 | 484.95 |
| 7 |  |
Shell Plc | +1.37% | +32.50 | 2,407.50 |
| 8 |  |
Coca-cola Hbc Ag | +1.29% | +26.00 | 2,034.00 |
| 9 |  |
Bunzl Plc | +1.04% | +31.00 | 3,008.00 |
| 10 |  |
Bhp Group Limited | +1.01% | +25.50 | 2,539.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Carnival Plc | -11.31% | -95.40 | 748.40 |
| 2 |  |
Easyjet Plc | -5.45% | -22.70 | 394.00 |
| 3 |  |
Tui Ag | -4.62% | -7.15 | 147.60 |
| 4 |  |
Itv Plc | -3.62% | -2.80 | 74.50 |
| 5 |  |
Johnson Matthey Plc | -3.51% | -74.00 | 2,036.00 |
| 6 |  |
International Consolidated Airlines Group S.a. | -3.05% | -4.24 | 134.94 |
| 7 |  |
Rolls-royce Holdings Plc | -3.03% | -2.76 | 88.35 |
| 8 |  |
Intertek Group Plc | -2.81% | -116.00 | 4,005.00 |
| 9 |  |
Smurfit Kappa Group Plc | -2.73% | -87.00 | 3,095.00 |
| 10 |  |
Kingfisher Plc | -2.60% | -6.40 | 239.60 |
US close: Stocks register modest gains following softer-than-expected PPI reading
Wall Street stocks closed higher early on Tuesday as market participants digested another key inflation report.
At the close, the Dow Jones Industrial Average was up 0.17% at 33,592.92, while the S&P 500 advanced 0.87% to 3,991.73 and the Nasdaq Composite saw out the session 1.45% firmer at 11,358.41.
The Dow opened 56.22 points higher on Tuesday, taking a bite out of losses recorded in the previous session.
Tuesday’s primary focus was October’s producer price index, with the Bureau of Labor Statistics‘ report for final demand rising 0.2% on a seasonally adjusted basis in October, driven by a 0.6% advance in prices for final demand goods. October’s PPI print came in lower than the 0.4% reading expected on the Street, signalling that inflation may be slowing down, and comes hot on the heels of last week’s cooler-than-expected consumer price index data.
Elsewhere on the macro front, manufacturing activity in the New York area improved a lot more than expected in November, according to a survey released on Tuesday. The New York Fed‘s Empire State general business conditions index rose to 4.5 from -9.1 in September. This was well ahead of analysts’ expectations for a reading of -5.0. According to the survey, 33% of respondents reported that conditions had improved over the month, while 29% said they had deteriorated.
Federal Reserve Governor Lisa Cook said on Tuesday that the US central bank remained focussed on addressing inflation that was “much too high”. “Monetary policy is, as we all know, a blunt instrument,” Cook said. “The focus for the Federal Reserve is on addressing inflation, and we want a sustainable, strong labour market.”
On another note, Michael Barr, the Federal Reserve’s vice chairman for supervision, said crypto-related activities needed to be regulated like more traditional financial-services providers as the majority of crypto activities take place outside of traditional banking regulations. However, Barr said that could change over time.
“Recent events in crypto markets have highlighted the risks associated with new asset classes when not accompanied by strong guardrails,” said Barr.
In corporate news, home improvement retailer Home Depot delivered better-than-expected top-line growth and earnings for the third quarter, while discount retail giant Walmart swung to a third-quarter loss but beat expectations for revenue, adjusted profit and same-store sales – and set a much better full-year outlook than anticipated.
Target, Lowe’s, Macy’s, Kohl’s, and Foot Locker will report later in the week.
Tuesday newspaper round-up: Local authorities, long-term sickness, HSBC
Energy suppliers have been accused of profiteering by charging “horrendous and financially crippling rates” to care homes facing huge bills this winter. The chief executive of Care England, the largest body representing independent providers of adult care, has accused gas suppliers of being “unduly onerous” in their practices. – Guardian
Local authorities have warned they face an “existential crisis” caused by massive funding shortfalls and any attempt by ministers to patch up budgets by allowing increased council tax is doomed to failure. The multibillion “black hole” in England’s municipal finances – which has pushed a number of councils to the brink of bankruptcy – could not be fixed by local ratepayers alone, who would face unrealistic council tax increases of up to 20%, the Local Government Association (LGA) said. – Guardian
Jeremy Hunt is preparing to announce measures to help the long-term sick back into jobs on Thursday, as figures showed that a record 2.5million people are now unable to work because of persistent illness. The Chancellor is expected to use Thursday’s Autumn Statement to warn that labour shortages are fuelling spiralling inflation by reducing the workforce and pushing up wages. – Telegraph
Shadow banking firms should draw up contingency plans so that they can be safely wound down if they collapse, the boss of the City regulator has told peers scrutinising the recent turmoil that gripped pension schemes. Nikhil Rathi, the chief executive of the Financial Conduct Authority, said an “important point” that had emerged from the pension crisis was the extent to which retirement schemes and other non-bank firms should have “resolution regimes”. – The Times
A second senior executive at HSBC is leaving the bank in a potential setback to the FTSE 100 lender as it seeks to fend off an activist campaign by its biggest shareholder. Chirantan Barua, who is HSBC’s global head of strategy, is to join Lloyds Banking Group as the head of its Scottish Widows division, it was announced yesterday. This comes only three weeks after HSBC surprised its shareholders by disclosing the exit of Ewen Stevenson, its highly regarded finance chief, who will leave next year. – The Times
