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London open: Stocks edge up as inflation jumps past BoE target
London stocks edged higher in early trade on Wednesday as higher-than-expected UK inflation fuelled expectations the Bank of England will refrain from cutting rates next month.
At 0840 GMT, the FTSE 100 was up 0.2% at 8,114.03.
Data from the Office for National Statistics showed that inflation jumped past the BoE’s 2% target in October after energy bills rose.
The consumer price index rose at an annual rate of 2.3% in October, up from 1.7% in September and above the 2.2% expected by economists. The increase was put down to higher electricity and gas prices.
Electricity prices rose by 7.7% in October, having fallen by 7.5% between the same two months last year. Meanwhile, gas prices were up 11.7%, having fallen by 7% last year.
The figures showed that services inflation ticked up to 5% in October from 4.9% the month before. However, it was down from 7.4% in July 2023, which was the joint highest rate – with May 2023 – since March 1992.
Core inflation – which strips out volatile elements such as food and energy – rose to 3.3% from 3.2%.
ONS chief economist Grant Fitzner said: “Inflation rose this month as the increase in the energy price cap meant higher costs for gas and electricity compared with a fall at the same time last year.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said October’s “surprisingly large rebound” in CPI won’t stop the Bank of England from cutting interest rates further.
“But it lends some support our view that the Bank will skip the December meeting and cut rates only gradually, by 25 basis points in February and at every other policy meeting until rates reach 3.50% in early 2026.”
Looking ahead to the rest of the day, attention will turn to third-quarter results from US tech giant Nvidia, due after the closing bell.
Richard Hunter, head of markets at Interactive Investor, said: “Nvidia has become the poster child of the new AI revolution and a market darling in turn, with investors still scrambling to price a stock whose earnings have continued to confound.
“Expectations are ratcheting higher with each release, which is unsurprising given a lofty valuation which has seen the share price rise by 850% over the last two years and by 205% this year alone.”
In equity markets, Sage Group surged to the top of the FTSE 100 as it posted a 21% rise in full-year underlying operating profit and announced a share buyback of up to £400m.
Severn Trent advanced as it reported a double-digit increase in first-half profits and said it expects capital investment to hit the top end of guidance this year, putting it in a strong position for the next five-year regulatory cycle, AMP8.
Genus gained as the animal genetics firm said trading has been encouraging and that full-year adjusted pre-tax profit was set to be in line with market expectations.
Rotork was also in the black after a trading update.
On the downside, Crest Nicholson fell after the housebuilder said it expected full-year earnings to be at the lower end of guidance due to a higher proportion of affordable homes being delivered.
British Land also lost ground as it said half-year underlying profit rose just 1% and that its portfolio valuation ticked up just 0.2%.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Sage Group Plc | +18.94% | +204.00 | 1,281.00 |
| 2 |  |
Severn Trent Plc | +3.42% | +92.00 | 2,781.00 |
| 3 |  |
United Utilities Group Plc | +2.46% | +27.00 | 1,123.50 |
| 4 |  |
Anglo American Plc | +1.82% | +42.00 | 2,346.50 |
| 5 |  |
South32 Limited | +1.75% | +3.30 | 191.60 |
| 6 |  |
International Consolidated Airlines Group S.a. | +1.42% | +3.40 | 243.10 |
| 7 |  |
Standard Chartered Plc | +1.39% | +13.20 | 960.20 |
| 8 |  |
Imperial Brands Plc | +1.29% | +32.00 | 2,507.00 |
| 9 |  |
Prudential Plc | +1.28% | +8.00 | 632.80 |
| 10 |  |
Carnival Plc | +1.10% | +19.50 | 1,786.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Barratt Redrow Plc | -1.37% | -5.60 | 402.30 |
| 2 |  |
Admiral Group Plc | -1.36% | -34.00 | 2,470.00 |
| 3 |  |
Segro Plc | -1.23% | -9.40 | 754.20 |
| 4 |  |
Flutter Entertainment Plc | -1.00% | -210.00 | 20,830.00 |
| 5 |  |
Jd Sports Fashion Plc | -0.98% | -1.15 | 115.65 |
| 6 |  |
Investec Plc | -0.90% | -5.50 | 608.00 |
| 7 |  |
Marks And Spencer Group Plc | -0.86% | -3.20 | 368.80 |
| 8 |  |
Pearson Plc | -0.83% | -10.00 | 1,190.00 |
| 9 |  |
Smith & Nephew Plc | -0.79% | -7.80 | 980.40 |
| 10 |  |
Auto Trader Group Plc | -0.77% | -6.20 | 796.00 |
US close: Dow falls for fourth day, but Nvidia lifts Nasdaq
US stocks finished mixed again on Tuesday with the Dow falling for the fourth straight day but the Nasdaq rising more than 1%, helped by gains from chip giant Nvidia.
The Dow declined 0.3% to a two-week low of 43,268.94, having now fallen 1.6% over the past four trading sessions and 2.3% since hitting a fresh record high of 44,293.13 on 11 November. Meanwhile, the S&P 500 rose 0.4% to 5,916.98 and the Nasdaq climbed 1.0% to 18,987.47.
Escalating tensions between Russia and Ukraine were also drawing an amount of investor attention at the open, with Russian president Vladimir Putin warning the US that the threshold for the use of nuclear weapons has now been lowered after Joe Biden allowed Ukraine to use US weapons to strike inside Russia.
Under the new doctrine, Russia will consider using nuclear weaponry if it, or its allies, were met with the use of “conventional weapons that created a critical threat to their sovereignty and (or) their territorial integrity”.
“It’s been a tough day for markets as investors rushed for safe-haven assets, rattled by escalating tensions between Russia and Ukraine,” said AJ Bell’s head of financial analysis Danni Hewson.
“It’s hard to believe there have been a thousand days since this conflict began and for much of that time investors have been able to push concerns aside, but today nerves were evident.”
In economic data, US housing starts fell by 3.1% to 1.31m in October, according to the Census Bureau, missing expectations for a reading of 1.33m. Housing starts fell as construction activity fell sharply across the American south as a result of hurricane activity throughout the period.
Meanwhile, building permits fell by 0.6% to a seasonally adjusted annualised rate of 1.41m, below market expectations for a reading of 1.43m.
Retailers in focus
Retail giant Walmart rose strongly after hiking its full-year guidance as third-quarter earnings and revenue came in ahead of expectations. Walmart now expects net sales to grow between 4.8% and 5.1% in FY24, up from previous forecasts of between 3.75% and 4.75%.
In contrast, shares of home improvement retailer Lowe’s were firmly lower despite the company lifting full-year guidance, betting on more spending from people hit by recent hurricanes. The company also reported better-than-expected third-quarter profit, driven by strong demand in the DIY and online channels, but the stock still dropped more than 4%.
Google owner Alphabet finished higher after UK regulators said the company’s investment in AI safety and research company Anthropic won’t require a full, in-depth probe. The Competition and Markets Authority said on Tuesday that it doesn’t believe Google has acquired a “material influence” over Anthropic as a result of its partnership.
American packaging group Berry Global was subdued despite the news that larger Australian rival Amcor is taking the company over in a deal worth $8.4bn. The transaction will see Berry shareholders receive 7.25 Amcor shares for each Berry share held, valuing Berry at $73.59 per share, compared with Monday’s closing price of $67.05.
Nvidia was providing a lift on the Nasdaq, jumping nearly 5% ahead of its earnings release on Wednesday, with analysts at Stifel and Truist Securities raising their target prices for the stock.
Wednesday newspaper round-up: Aviva Investors, HSBC, car finance
One of the UK’s biggest pension funds has lost more than £350m on a series of “calamitous” investments in incinerator power plants that are expected to go bust in the coming days. The Guardian understands that Aviva Investors will put three incinerators into administration this week after pouring millions of pounds into what has been described as the country’s “dirtiest form of power generation”. – Guardian
HSBC is to launch its first UK “wealth centre” in London’s upmarket Mayfair district, offering more personalised banking services and exclusive events such as wine tastings as part of a drive to win more rich customers. The lender will take up two floors of the 16-storey Smithson Tower at 25 St James’s Street – close to the Ritz Hotel and Fortnum & Mason department store – as part of a wider revamp of HSBC’s premier-tier bank service. Aimed at the sought-after “mass affluent” market, premier is a tier below private-banking clients and targets customers with £100,000 to £2m in income, assets or deposits. – Guardian
Treasury officials called retailers to make the case for Rachel Reeves’s tax raid ahead of a public letter that warned over changes announced in her maiden Budget. Retailers are understood to have been contacted by the Treasury last week to find out whether they planned on giving their support to the letter, which criticised the Chancellor’s decision to impose extra costs on the industry. – Telegraph
Britain’s official labour market statistics may be underestimating the number of people in employment by almost 1 million and overstating the extent of the country’s inactive workforce problem. The Resolution Foundation, a think tank, has calculated that official measures of the state of the labour market produced by the Office for National Statistics have undercounted the levels of employment by 930,000 since the pandemic. – The Times
A mounting scandal over mis-sold motor finance could leave lenders footing a compensation bill of as much as £30 billion, a leading credit rating agency has warned. Moody’s estimate is the highest so far and will fuel speculation that the scandal facing banks and other car loan providers will mirror the payment protection insurance debacle, which ultimately resulted in firms absorbing about £50 billion in redress costs. – The Times
