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London open: Stocks jump as inflation unexpectedly falls in December
London stocks jumped in early trade on Wednesday as data showed that UK inflation unexpectedly eased in December after two months of increases, underpinning expectations of a rate cut in February.
At 0835 GMT, the FTSE 100 was up 0.7% at 8,257.79.
Figures released earlier by the Office for National Statistics showed that consumer price inflation rose 2.5%, down from 2.6% in November, and versus expectations for it to remain unchanged.
Meanwhile, core inflation – which excludes food and energy – declined to 3.2% from 3.5%, versus expectations for a smaller drop to 3.4%.
Services inflation eased to 4.4% in December from 5% the month before. Economists were expecting 4.8%.
ONS economist Grant Fitzner said: “Inflation eased very slightly as hotel prices dipped this month, but rose a year ago. The cost of tobacco was another downward driver, as prices increased by less than this time last year.
“This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023.”
Danni Hewson, head of financial analysis at AJ Bell, said: “After the ill winds which have buffeted UK financial markets over the past couple of weeks, today’s inflation figures will undoubtedly provide some welcome respite.
“Whilst at 2.5% inflation is still stubbornly above the Bank of England’s target, the fact headline CPI has come in below expectation and has even fallen a bit is cause for a degree of celebration. Markets have immediately seized on the numbers which will be the last inflation snapshot MPC members will get before they make their decision on whether to deliver an interest rate cut in February.
“From just 60% predicting a cut at the next meeting, expectation since the ONS figures were released has shot up to over 80% according to Refinitiv data and there is growing optimism that more cuts could be on the cards for 2025 than had been anticipated. A significant cooling in service sector inflation will have boosted the odds as central bankers have been rightly concerned about the impact of pay increases on this crucial cog in the UK’s economic wheel.
“But it’s important not to over egg this pudding and not to forget the potential for another inflation spike if businesses do pass on those extra costs coming their way in April as they have warned they will have to.
“There’s also the potential that global trade friction resulting from US tariffs could keep things volatile for the foreseeable future. And whilst rate cuts would be welcome, one of the reasons they’re likely to be considered is because of the weakness which seems embedded in the UK economy.
“The chancellor might have let out a sigh of relief this morning but she’s not off the hook yet and will need to follow through on the promise to properly lay out her growth plans if she’s going to win over markets.”
In equity markets, rate-sensitive housebuilders were on the rise, with Taylor Wimpey, Persimmon, Barratt Redrow and Berkeley Group among the top performers on the FTSE 100.
Unite Group was the standout gainer on the top-flight index, however, after an initiation at ‘buy’ by Goldman Sachs.
DCC was also in the black after an upgrade to ‘outperform’ at RBC Capital Markets.
Diploma rallied as the distribution group hailed a “strong” first quarter, in line with expectations.
Animal genetics firm Genus surged as it said it expects full-year adjusted pre-tax profit to be at the top end of the range of market forecasts after a strong first half. Consensus expectations are for a range of between £63m and £67.4m.
Currys was in the black as the electricals retailer raised full-year profit guidance after reporting a strong performance over Christmas and Black Friday, with a 2% rise in UK underlying sales as consumers bought more laptops and mobile phones.
Recruitment firm Hays rose despite saying it expects interim pre-exceptional operating profit of £25m, towards the lower end of the consensus range amid subdued trading conditions as net fees fell 12% in the second quarter.
Pub group Mitchells & Butlers, housebuilder Vistry, asset manager Ashmore and Just Group all gained after trading updates.
On the downside, miners Anglo American and Antofagasta were both knocked lower by downgrades to ‘underperform’ at RBC Capital Markets.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Barratt Redrow Plc | +3.45% | +13.90 | 416.70 |
| 2 |  |
Lloyds Banking Group Plc | +3.10% | +1.66 | 55.28 |
| 3 |  |
Diploma Plc | +2.94% | +120.00 | 4,202.00 |
| 4 |  |
Severn Trent Plc | +2.87% | +67.00 | 2,405.00 |
| 5 |  |
United Utilities Group Plc | +2.60% | +24.40 | 962.00 |
| 6 |  |
Marks And Spencer Group Plc | +2.56% | +8.40 | 336.00 |
| 7 |  |
Carnival Plc | +2.47% | +44.00 | 1,824.00 |
| 8 |  |
Dcc Plc | +2.08% | +105.00 | 5,150.00 |
| 9 |  |
Pershing Square Holdings Ltd | +2.03% | +84.00 | 4,230.00 |
| 10 |  |
Intertek Group Plc | +2.02% | +96.00 | 4,860.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Anglo American Plc | -1.33% | -33.00 | 2,439.00 |
| 2 |  |
Flutter Entertainment Plc | -0.79% | -170.00 | 21,300.00 |
| 3 |  |
Imperial Brands Plc | -0.66% | -17.00 | 2,578.00 |
| 4 |  |
Antofagasta Plc | -0.41% | -7.00 | 1,682.00 |
| 5 |  |
Reckitt Benckiser Group Plc | -0.33% | -16.00 | 4,847.00 |
| 6 |  |
Bhp Group Limited | -0.30% | -6.00 | 2,020.00 |
| 7 |  |
Astrazeneca Plc | -0.28% | -30.00 | 10,600.00 |
| 8 |  |
Rentokil Initial Plc | -0.24% | -0.90 | 376.60 |
| 9 |  |
South32 Limited | -0.17% | -0.30 | 171.70 |
| 10 |  |
Unilever Plc | -0.13% | -6.00 | 4,474.00 |
US close: Stocks mixed following December PPI reading
Wall Street stocks delivered a mixed performance on Tuesday as the blue-chip Dow Jones built on yesterday’s gains.
At the close, the Dow Jones Industrial Average was up 0.52% at 42,518.28, while the S&P 500 advanced 0.11% to 5,842.91 and the Nasdaq Composite saw out the session 0.23% firmer at 19,044.39.
The Dow closed 221.16 points higher on Tuesday, extending gains recorded in the previous session.
Tuesday’s primary focus was news that US wholesale inflation rose month-on-month in December, according to the Bureau of Labor Statistics, principally due to heightened energy prices throughout the month.
December’s producer price index increased by 0.2% last month, down from the previous month’s 0.4% increase. On an annualised basis, producer prices were up 3.3% year-on-year, down from 3.4% in November. When stripping out volatile foods, energy, and trade services, PPI increased by 0.1% in December and 3.3% year-on-year.
Elsewhere on the macro front, the National Federation of Independent Business’ optimism index surged to 105.1 in December, the highest reading since October 2018, up from a print of 101.7 in November due to an improved economic outlook following the US federal election.
NFIB economist Bill Dunkelberg said: “Small business owners feel more certain and hopeful about the economic agenda of the new administration. Expectations for economic growth, lower inflation, and positive business conditions have increased in anticipation of pro-business policies and legislation in the new year”.
Wednesday newspaper round-up: Funeral costs, Frasers Group, KKR
The “cost of dying” has hit a record high, prompting growing numbers of grieving UK families to turn to crowdfunding or sell possessions to help pay for a funeral, according to a report. The average cost of a basic funeral has increased by 3.5% in a year to hit an “all-time high” of £4,285, according to the insurer SunLife, which has been monitoring UK funeral costs for two decades. – Guardian
The owner of Sports Direct has confirmed that two-thirds of its retail workforce remain on zero-hours contracts ahead of new legislation designed to limit their use. Frasers Group told MPs who are examining plans to strengthen protection for employees that 11,500 staff were on the contracts, which do not guarantee any weekly working shifts, and did not receive compensation even if shifts were changed at the last minute. – Guardian
Rachel Reeves’s Budget tax raid will result in fewer workers across the retail sector, sparking fears that customers will receive worse customer service. As well as warning of price rises following the Budget, the British Retail Consortium (BRC) has said employers are also preparing to cut back on staffing to cover the cost of higher National Insurance rates. In its latest survey, the lobby group revealed that almost half of retail bosses expect to trim headcount in shops (46pc), while the majority of businesses (56pc) are also planning to reduce hours and pare back overtime. – Telegraph
KKR, the American private equity group, has appointed Sir Jeremy Darroch, a former boss of Sky, as an executive adviser to help it grow its telecoms, media and technology activities. Darroch, who was Sky’s chief executive between 2007 and 2021, will help “identify new investment opportunities”, KKR said. – The Times
The UK economy is edging closer to stagflation amid the sharpest fall in business confidence in two years and entrenched anxieties about tax rises, a survey shows. An index of business confidence compiled by the Institute of Chartered Accountants in England and Wales (ICAEW) slid by 14.2 points over the past three months to 0.2, the weakest reading since the final quarter of 2022 when the UK was gripped by financial market volatility after the mini-budget. – The Times
