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LONDON BRIEFING: Pound below USD1.30 after soft UK inflation figures

19th Jul 2023 07:44

(Alliance News) - Stocks in London are called higher on Wednesday, following softer-than-expected inflation figures.

Inflation in the UK cooled more quickly than expected in June, figures from the Office for National Statistics showed on Wednesday.

Annually, consumer prices rose by 7.9% in June, cooling from an 8.7% jump in May. June's reading was lower than market forecasts of 8.2%, as cited by FXStreet.

The crucial core inflation figure unexpectedly fell, having been expected to remain stubbornly above 7%.

The FTSE 100 had been called flat prior to the inflation data. The pound softened against the dollar shortly afterwards.

"Even with a softer-than-expected figure, inflation in Britain remains high and stickier than in other Western economies, and that keeps odds for further [Bank of England] action sensibly more hawkish than for other major central banks," considered Swissquote Bank's Ipek Ozkardeskaya.

In early UK company news, Aviva gave updated financial guidance for new accounting standards. Rio Tinto shared an upbeat outlook for shipments from its Pilbara operations in Western Australia. Polar Capital Technology Trust said it underperformed against its benchmark, having underweighted "mega-cap" technology stocks.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called up 66.5 points, 0.9%, at 7,520.19

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Hang Seng: down 0.5% at 18,919.96

Nikkei 225: closed up 1.3% at 32,896.03

S&P/ASX 200: closed up 0.6% at 7,323.70

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DJIA: closed up 366.58 points, or 1.1%, at 34,951.93

S&P 500: closed up 32.19 points, or 0.7%, at 4,554.98

Nasdaq Composite: closed up 108.69 points, or 0.8%, at 14,353.64

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EUR: down at USD1.1228 (USD1.1237)

GBP: down at USD1.2945 (USD1.3083)

USD: up at JPY139.44 (JPY138.76)

Gold: down at USD1,976.64 per ounce (USD1,982.17)

Oil (Brent): down at USD79.48 a barrel (USD79.67)

(changes since previous London equities close)

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ECONOMICS

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Wednesday's key economic events still to come:

11:00 CEST EU CPI

09:30 BST UK house price index

09:30 BST UK forecasts for the economy statistical release

17:00 BST UK BoE Deputy Governor David Ramsden speech

07:00 EDT US MBA weekly mortgage applications survey

08:30 EDT US housing starts

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Inflation in the UK cooled more quickly than expected in June, figures from the Office for National Statistics. Annually, consumer prices rose by 7.9% in June, cooling from an 8.7% jump in May. June's reading was lower than market forecasts of 8.2%, as cited by FXStreet. On a monthly basis, UK consumer prices rose by 0.1%, compared to a 0.7% rise in May. The increase was lower than market expectations of a 0.4% rise. Core inflation - excluding energy, food, alcohol, and tobacco - unexpectedly cooled to an annual rate of 6.9%. It had been expected to remain unchanged from May's reading of 7.1%.

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The ONS reported that UK producer prices fell in June. Producer input prices fell 1.3% on a monthly basis in June, compared to the upwardly-revised fall of 1.2% in May. June's producer price decline was chunkier than the market forecast of a 0.3% fall. Annually, producer input prices fell 2.7%, having risen by a downwardly-revised 0.4% in May. They had been expected to fall by 1.6% in June. May's producer input prices were initially reported as a 1.5% decline from April. They were first thought to have risen 0.5% annually.

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The proportion of UK-listed companies that issued profit warnings in the past year was higher than any year since 2008, outside of the pandemic, according to new analysis. It comes as higher borrowing costs and a tougher sales environment have weighed heavily on businesses. Companies listed on the London Stock Exchange issued 66 profit warnings between April and June, EY-Parthenon revealed in its latest report. The figure marks the highest second-quarter total in three years, when warnings soared to 166 in the aftermath of the Covid pandemic in 2020.

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BROKER RATING CHANGES

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Berenberg cuts BP price target to 490 (560) pence - 'hold'

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Berenberg starts Renewi with 'buy' - price target 710 pence

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Exane BNP raises Segro to 'outperform' - price target 900 pence

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COMPANIES - FTSE 100

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Aviva provided its 2022 results restate for IFRS 17 and IFRS 9 account rules, as well as providing profit guidance for the first half and 2023 as a whole. It expects around GBP700 million operating profit in the first half, which would be up from GBP661 million a year before. In 2023, it expects operating profit to grow between 5% and 7% from the GBP1.35 billion achieved in 2022. "The operating profit and balance sheet impacts we are announcing today are consistent with our previous guidance, and there is no impact to the underlying economics of our business, our strategy or dividend guidance," said CFO Charlotte Jones.

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Rio Tinto said it expects to deliver iron ore shipments from Pilbara at the upper half of its annual guidance range, after building "further momentum" over the second quarter. Over the first half as a whole, Pilbara shipments and production were both 7% ahead of the prior year at 161.7 million and 160.5 million tonnes respectively. However, the Anglo-Australian mining and metals company reduced guidance for annual refined copper and alumina production. "The ramp-up of the Oyu Tolgoi underground mine progressed ahead of plan, and we remain on track to more than triple its copper production by the end of the decade. Production downgrades during the quarter highlight that we still have much more to do elsewhere," said Chief Executive Jakob Stausholm.

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COMPANIES - FTSE 250

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Polar Capital Technology Trust said its net asset value per share fell 2.8% over the year to April 30. At the end of the year, NAV per share was 2,239.48 pence, compared to 2,305.13p a year before. Over the same period, its benchmark index increased 2.9%. "I would like to be reporting more positive performance numbers, but generally markets have not been constructive and technology in particular has suffered in the post-Covid reset and high interest rate environment," said Chair Catherine Cripps. The fund's under-weighting of "mega-cap" technology stocks is also to blame for the underperformance, she added.

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OTHER COMPANIES

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Australia's Woodside Energy Group backed its annual production guidance, despite a weakening in second-quarter sales and production compared to the beginning of 2023. In the second quarter, Woodside said production fell 4.9% from the first quarter to 44.5 million barrels of oil equivalent, but this was up 32% from a year before. Sales fell 4.0% from the prior quarter to 48.4 million boe, but was up 35% from the prior year. The quarterly fall in sales was mostly the result of lower production, Woodside said. Revenue during the quarter plunged 29% from the first quarter to USD3.08 billion from USD4.33 billion, and was 10% below the USD3.44 billion achieved a year before. Despite the decline in the second quarter, the Perth-based company left production guidance for 2023 unchanged, still expecting between 180 and 190 million boe.

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By Elizabeth Winter, Alliance News senior markets reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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