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London open: Stocks flat as investors digest inflation data
London stocks were little changed in early trade on Wednesday as investors mulled the latest UK inflation data.
At 0910 GMT, the FTSE 100 was flat at 7,849.51, while the pound was 0.4% firmer against the dollar at 1.2333.
Figures released earlier by the Office for National Statistics showed that consumer price inflation eased to 10.5% in December from 10.7% the month before, falling for the second month in a row. Economists had been expecting the inflation rate to be unchanged. Still, it remains close to a 40-year high and well above the Bank of England’s 2% target.
A drop in petrol and clothing prices was behind the decline, helping to offset higher prices in hotels, restaurants, food and non-alcoholic drinks.
Meanwhile, the core rate of inflation – which excludes food, energy, alcohol and tobacco – was flat at 6.3%.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “As energy prices retreat, inflation is finally climbing down from its dizzying heights but it’s far from a vertiginous descent.”
She said that with the headline rate of inflation still firmly in double digits there is still a long way to go before the price spiral is under control, particularly given that services inflation heated up again, rising from 6.3% in November to 6.8% in December.
Capital Economics said the small fall in CPI inflation and unchanged core rate “suggests it is too early for the Bank of England to declare victory in its fight against inflation”.
“This supports our view that the Bank will raise Bank Rate from 3.50% now to a peak of 4.50% in the coming months.”
In equity markets, online supermarket Ocado was the top gainer on the FTSE 100, having tanked on Wednesday after a disappointing update on its joint venture with Marks & Spencer, Ocado Retail.
Luxury fashion brand Burberry rose despite saying it took a hit from Covid-19 disruption in its key market of China. Like-for-like sales grew by only 1% to £756m in the three months to end-December, compared with a rise of 7% a year earlier and against a forecast increase of 2%.
Diversified engineer Smiths Group rallied after lifting its full-year guidance, while electricals retailer Currys surged after it backed its full-year guidance, with a solid performance in the UK and Ireland helping to offset weakness in the international segment.
Shares in TI Fluid Systems tumbled as the company said sales in China had been hit in the fourth quarter due to Covid restrictions and a switch to electric vehicles in the country. The manufacturer of automotive fluid storage systems for light vehicles said 2022 revenue is expected to be around €3.26bn, up 10% year on year.
However, it warned that group constant currency revenue growth was expected to 100 basis points behind global light vehicle production (GLVP) growth due to the rapid transition of domestic Chinese original equipment manufacturers (OEM) to electric vehicles “which presents a short-term mix issue for the group in that market”.
In broker note action, British Land was boosted by an upgrade to ‘buy’ at Bank of America Merrill Lynch, but Segro was hit by a rating downgrade by the same outfit.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +5.40% | +39.60 | 772.60 |
| 2 |  |
Smiths Group Plc | +2.71% | +45.50 | 1,726.50 |
| 3 |  |
International Consolidated Airlines Group S.a. | +2.50% | +3.92 | 160.86 |
| 4 |  |
Carnival Plc | +2.18% | +16.80 | 789.00 |
| 5 |  |
Tui Ag | +1.99% | +3.65 | 187.20 |
| 6 |  |
Easyjet Plc | +1.90% | +8.30 | 444.20 |
| 7 |  |
Centrica Plc | +1.89% | +1.84 | 99.06 |
| 8 |  |
Experian Plc | +1.82% | +54.00 | 3,015.00 |
| 9 |  |
Auto Trader Group Plc | +1.64% | +9.20 | 568.80 |
| 10 |  |
British Land Company Plc | +1.49% | +6.60 | 448.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Crh Plc | -1.67% | -61.50 | 3,625.50 |
| 2 |  |
Gsk Plc | -1.64% | -23.60 | 1,414.20 |
| 3 |  |
Coca-cola Hbc Ag | -1.25% | -24.50 | 1,939.00 |
| 4 |  |
Segro Plc | -1.22% | -10.40 | 839.60 |
| 5 |  |
Bt Group Plc | -1.21% | -1.60 | 130.60 |
| 6 |  |
United Utilities Group Plc | -1.11% | -11.50 | 1,028.00 |
| 7 |  |
Whitbread Plc | -0.83% | -25.00 | 3,003.00 |
| 8 |  |
Shell Plc | -0.81% | -19.50 | 2,399.50 |
| 9 |  |
Severn Trent Plc | -0.79% | -22.00 | 2,749.00 |
| 10 |  |
Ferguson Plc | -0.66% | -75.00 | 11,275.00 |
US close: Stocks mixed as traders digest more Q4 earnings
Wall Street stocks delivered a mixed performance on Tuesday as market participants digested more corporate earnings.
At the close, the Dow Jones Industrial Average was down 1.14% at 33,910.85, while the S&P 500 slipped 0.20% to 3,990.97 and the Nasdaq Composite saw out the session 0.14% firmer at 11,095.11.
The Dow closed 391.76 points lower on Tuesday, easily erasing gains recorded before the long weekend.
Corporate earnings were again in focus on Tuesday, with financial services company Morgan Stanley posting fourth-quarter earnings that beat expectations, driven by record revenues in its wealth management unit.
Elsewhere, Goldman Sachs reported a marked decline in fourth-quarter earnings, principally due to a massive increase in credit provisions in the period, while United Airlines expects full-year profits to quadruple in 2023 amid limited industry capacity.
On the macro front, factory sector activity in the New York area fell sharply at the start of 2023, with the Federal Reserve Bank of New York‘s factory sector index plummeting from a reading of -11.2 in December to -32.9 for January. Economists had pencilled-in a reading of -8.7.
On another note, Federal Reserve Bank of New York president John Williams said on Tuesday that the economy will fare better when all US citizens have a chance at participating.
“An inclusive economy doesn’t just help those that are in need of more or different opportunities, rather, it boosts the economy more broadly,” Williams said.
Wednesday newspaper round-up: German economy, Microsoft, Asda/Co-op
Germany will avoid a recession this year, Chancellor Olaf Scholz has insisted, despite the energy crisis which has ravaged its economy. Mr Scholz said that new liquefied natural gas (LNG) terminals on the Baltic and North Sea coasts would help cushion the blow from the energy crisis on Germany’s crucial manufacturing sector. – Guardian
China has extended the olive branch to Western democracies and global capitalists alike, promising a new era of detente after the coercive “wolf warrior” diplomacy of the last five years. Vice-premier Liu He, the economic plenipotentiary of Xi Jinping’s China, told a gathering of business leaders and ministers in Davos that China is back inside the tent and eager to restore the money-making bonhomie of the golden years. – Guardian
Microsoft is preparing to axe thousands of jobs in the latest move by one of the world’s biggest technology companies to reduce its workforce in the face of a slowing global economy. Sky News has learnt that the US software giant could announce plans to cull a significant number of posts around the world within a matter of days. – Sky News
About £260 million intended to support self-employed people during the pandemic was stolen, tax officials have told MPs. In the 2020-21 financial year, HM Revenue & Customs said that criminals accounted for a third of the “fraud and error” losses in an income support scheme for the self-employed. – The Times
Asda’s £600 million takeover of the Co-op’s petrol forecourts is being investigated by the competition watchdog. Asda, owned by the Lancashire-based billionaire Issa brothers and the private equity firm TDR Capital, agreed in August to buy 132 petrol stations and attached convenience stores from the Co-op. The deal was completed towards the end of last year and led to 2,300 workers moving to the supermarket giant. – The Times
