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LONDON MARKET CLOSE: Stocks buoyant ahead of US inflation print

11th Jan 2023 16:58

(Alliance News) - Stocks in London ended on an upbeat note on Wednesday as markets looked ahead to key inflation data out of the US on Thursday.

The FTSE 100 index closed up 30.49 points, or 0.4% at 7,724.98 on Wednesday. The FTSE 250 ended up 130.73 points, or 0.7%, at 19,521.70. The AIM All-Share closed up 4.37 points, or 0.5%, at 851.62.

The Cboe UK 100 ended up 0.5% at 773.14, the Cboe UK 250 closed up 0.6% at 17,022.34, and the Cboe Small Companies ended up 0.5% at 13,547.07.

The US will release its consumer price index print at 1330 GMT on Thursday.

Investors will be looking to whether US inflation will cool off enough to allow the US Federal Reserve to cut interest rates later this year.

At the moment, markets are expecting a 25 basis point hike at the Fed's next meeting in February, according to the CME Fed Watch Tool.

At its December meeting, the Federal Open Market Committee lifted the target range for the federal funds rate by 50 basis points to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.

AJ Bell's Russ Mould said that markets were calmed ahead of the inflation data after a speech by Federal Reserve chair Jerome Powell on Tuesday failed to offer up any hawkish surprises.

Further, Fed Governor Michelle Bowman said that US unemployment has stayed low despite rising interest rates, representing a "hopeful sign" that consumer prices can be tamed without a significant economic downturn.

The optimism around the US economy allowed the dollar to broadly strengthen at the time of the London equities close on Wednesday.

The pound was quoted at USD1.2125 at the London equities close on Wednesday, down from USD1.2146 at the close on Tuesday. The euro stood at USD1.0758, up against USD1.0724. Against the yen, the dollar was trading at JPY132.57 late Wednesday, up compared to JPY132.29 late Tuesday.

"From an investor perspective," said Oanda's Craig Erlam, "it would take something pretty terrible tomorrow... to really rock the boat."

Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average up 0.3%, the S&P 500 index up 0.5%, and the Nasdaq Composite was 0.9% higher.

In London, JD Sports ended 6.9% higher, the best blue-chip performer on Tuesday, after reporting bumper Christmas sales.

The sportswear retailer said organic revenue in the six weeks to December 31 jumped more than 20% from a year before.

As a result, JD Sports now expects pretax profit before exceptional items for the financial year ending January 28 at the top end of a GBP933 million and GBP985 million market consensus range.

The very top of that range represents growth of 4.0% from GBP947.2 million the year prior.

In a positive read-across, Sport Direct-owner Frasers Group was up 4.0%.

Sainsbury's closed down 2.4% after it said it now expects underlying pretax profit for the financial year ending in March to be towards the upper end of GBP630 million to GBP690 million guidance. This would be down from GBP730 million a year earlier.

The firm also reported that its grocery sales volume outperformed the market in its financial third quarter, while non-food arm Argos performed "exceptionally well" over Christmas.

In the FTSE 250, Direct Line plunged 23% as it blamed severe cold weather for a significant increase in claims over December, pushing the company to an underwriting loss for the year.

Direct Line told investors that it expects related claims of around GBP90 million across the home and commercial divisions, and would be nixing its final dividend as a result.

Elsewhere in London, Reach plummeted 26% as the newspaper publisher said it will move to cut costs as it continues to grapple with tumbling advertising revenue.

Revenue in the fourth quarter to December 25 dropped 4.2% year-on-year. Annual revenue was 2.3% lower.

During the final quarter, advertising revenue alone dropped 20%. It slumped 16% for the whole of the financial year.

Looking ahead, Chief Executive Officer Jim Mullen said: "We expect current market headwinds will continue during 2023 and have therefore taken decisive action, putting in place a further cost reduction plan. This will ensure we retain our strong foundations and are able to continue investing in our digital growth priorities, which position us to benefit strongly when the economic environment improves."

Brent oil was quoted at USD81.43 a barrel at the London equities close on Wednesday, up from USD79.74 late Tuesday. Gold was quoted at USD1,872.57 an ounce, lower against USD1,875.50.

In European equities on Wednesday, the CAC 40 in Paris ended up 0.8%, while the DAX 40 in Frankfurt ended 1.1% higher.

The eurozone's current account deficit widened in the third quarter of 2022, figures from Eurostat showed.

The single currency area's current account deficit stretched to EUR105.9 billion at the end of September, from EUR39.2 billion a quarter earlier. It swung from a surplus of EUR65.7 billion a year prior.

The figures do not include Croatia, which became the 20th member of the eurozone at the start of 2023 after it officially adopted the euro as its currency.

In Thursday's UK corporate calendar, there's trading statements from supermarkets Tesco and Masks & Spencer as well as online clothing retailer ASOS.

In the economic calendar, alongside the keenly-awaited inflation data, the US will also publish its weekly unemployment insurance claims at 1330 GMT.

By Heather Rydings, Alliance News senior economics reporter

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