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London open: Stocks edge lower after unexpected rise in inflation
London stocks edged lower in early trade on Wednesday as an unexpected jump in consumer price inflation put pressure on the Bank of England to hike rates.
At 0825 GMT, the FTSE 100 was down 0.4% at 7,507.95, while sterling was 0.5% firmer against the dollar at 1.2274 after data from the Office for National Statistics showed that CPI in the year to February ticked higher, driven by the soaring cost of food.
Inflation rose to 10.4% from 10.1% in January, coming in above expectations of 9.9%. On a monthly basis, CPI rose to 1.1% compared to 0.8% in February 2022.
The largest upward contributions came from restaurants and cafes, which the ONS said was driven by increases in the cost of alcohol, as well as food, and clothing. Food prices soared by 18.2% over the year.
Core inflation, which strips out the more volatile elements of food, energy, alcohol and tobacco, also rose sharply, to 6.2% from 5.8% in January.
ONS chief economist Grant Fitzner said: “Inflation ticked up in February mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
“Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.
“These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for some seven months.”
The inflation figures came just a day before the Bank of England’s latest policy announcement.
Paul Dales, chief UK economist at Capital Economics, said the reacceleration in overall CPI inflation and core inflation “may be enough to tilt the Bank of England towards raising interest rates from 4.00% to 4.25% tomorrow despite the recent turmoil in the banking system”.
Danni Hewson, head of financial analysis at AJ Bell, said: “After two weeks of instability on financial markets there had been growing expectation that the Bank of England may take a pause in its rate hike journey, and that can’t be ruled out, but today’s upward shift will be akin to popping a rooster into the henhouse.”
Looking ahead to the rest of the day, investors were eyeing a policy announcement from the Federal Reserve, due at 1800 GMT.
In equity markets, housebuilder Vistry gained after it reported better-than-expected full-year profits and said market conditions were improving. The company posted a 21% rise in adjusted pre-tax profit to £418.4m for the year to December 31 against an average estimate of £411.1m.
Elsewhere, software, security and cloud services specialist Bytes Technology rallied after it said annual gross profit and adjusted operating earnings would be up 20%.
WPP was in focus after it announced the acquisition of influencer marketing agency Goat for an undisclosed sum.
In broker note action, Marks & Spencer was boosted by rating upgrades at Exane, Goldman Sachs and Citi.
However, British Land was knocked lower by a downgrade to ‘sell’ at Goldman.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Marks And Spencer Group Plc | +3.71% | +5.50 | 153.55 |
| 2 |  |
Barclays Plc | +1.72% | +2.46 | 145.60 |
| 3 |  |
Coca-cola Hbc Ag | +1.48% | +32.00 | 2,191.00 |
| 4 |  |
Melrose Industries Plc | +1.24% | +1.90 | 155.05 |
| 5 |  |
Hsbc Holdings Plc | +1.05% | +5.80 | 559.80 |
| 6 |  |
Lloyds Banking Group Plc | +0.72% | +0.35 | 48.51 |
| 7 |  |
Smith & Nephew Plc | +0.64% | +7.50 | 1,173.50 |
| 8 |  |
Standard Chartered Plc | +0.56% | +3.60 | 647.20 |
| 9 |  |
Next Plc | +0.55% | +38.00 | 6,900.00 |
| 10 |  |
Kingfisher Plc | +0.52% | +1.40 | 270.70 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
British Land Company Plc | -4.14% | -16.50 | 382.40 |
| 2 |  |
Segro Plc | -3.28% | -24.40 | 719.60 |
| 3 |  |
Land Securities Group Plc | -2.41% | -14.80 | 598.60 |
| 4 |  |
Severn Trent Plc | -2.31% | -65.00 | 2,743.00 |
| 5 |  |
Vodafone Group Plc | -1.91% | -1.77 | 90.90 |
| 6 |  |
Carnival Plc | -1.72% | -11.60 | 664.40 |
| 7 |  |
Smurfit Kappa Group Plc | -1.61% | -48.00 | 2,928.00 |
| 8 |  |
United Utilities Group Plc | -1.58% | -16.50 | 1,026.50 |
| 9 |  |
Burberry Group Plc | -1.51% | -36.00 | 2,344.00 |
| 10 |  |
Rio Tinto Plc | -1.35% | -72.00 | 5,268.00 |
US close: Stocks extend rally as chaos in banking sector cools
Wall Street stocks ended the session firmly in the green on Tuesday amid hopes that recent chaos in the banking sector may have finally been stifled.
At the close, the Dow Jones Industrial Average was up 0.98% at 32,560.60, while the S&P 500 advanced 1.30% to 4,002.87 and the Nasdaq Composite saw out the session 1.58% firmer at 11,860.11.
The Dow closed 316.02 points higher on Tuesday, building on gains recorded in the previous session.
Regional banks traded higher throughout the session after Treasury Secretary Janet Yellen stated that the government was ready to provide further deposit guarantees to stem liquidity problems if the state of the current banking crisis worsens.
“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader US banking system,” said Yellen. “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Traders now expect the Federal Reserve, which wraps up its two-day policy meeting on Wednesday, to slow its recent pace of tightening as a result of the unrest in the banking sector, with market participants pricing in a 0.25% rate hikes.
On the macro front, existing home sales shot up 14.5% in February to annual rate of 4.58m, according to the National Association of Realtors, snapping a 12-month streak of declines for the largest monthly percentage increase since July 2020. Markets were expecting a significantly smaller 5% rebound.
“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said chief economist Lawrence Yun. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”
Wednesday newspaper round-up: Pensions, banking reforms, Credit Suisse
The former chief executive of the housebuilder Persimmon who landed one of the biggest bonuses in British corporate history has set up a new venture with his wife. Jeff Fairburn, who was ousted from Persimmon after protests at his bumper £82m bonus in 2018, has set up an investment company with his wife, Jayne, the Guardian can reveal. – Guardian
Jeremy Hunt’s pensions tax break for the highest 1% of savers in Britain stands to benefit almost as many bankers as doctors, an economist has said, as the government insisted the budget giveaway was designed to cut NHS waiting lists. On a day of renewed pressure over the £1bn giveaway, Rishi Sunak argued that scrapping the tax-free lifetime allowance on pensions would encourage more doctors to stay in employment rather than taking retirement. – Guardian
Jeremy Hunt has committed to banking reforms intended to make the City of London more competitive, despite fears that looser regulation will introduce yet more risk to a fragile financial system. A Treasury source confirmed that plans to slash red tape – dubbed “Big Bang 2.0” to draw parallels with Margaret Thatcher’s overhaul of the Square Mile – will be brought forward unchanged in the wake of the rescues of Credit Suisse and the UK arm of Silicon Valley Bank (SVB). – Telegraph
Second-hand electric car prices are tumbling amid a glut of stock as drivers trade their cars in. The average price of a pre-owned electric vehicle has fallen by 13pc over the last year to £33,060, AutoTrader found. – Telegraph
Bosses at the Dubai company behind P&O Ferries have shared more than £15 million after the sacking of hundreds of UK-based crew last year. DP World paid directors and key managers $18.9 million (£15.5 million), including bonuses, up from $17.8 million in 2021, its annual report shows. – The Times
The Swiss government has ordered Credit Suisse to freeze the payment of deferred bonuses to its bankers, in a fresh blow to staff following the troubled lender’s forced sale to rival UBS. The Federal Council said the temporary suspension applied to “already granted but deferred variable remuneration for the financial years up to 2022”. – The Times
