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LONDON MARKET CLOSE: Stocks lower after central bank speeches

10th Jan 2023 16:57

(Alliance News) - Stock prices in London closed lower on Tuesday, after the Bank of England's chief economist warned that inflation in the UK may prove to be "more persistent."

The FTSE 100 index closed down 30.45 points, or 0.4%, at 7,694.49. The FTSE 250 ended down 88.42 points, or 0.5%, at 19,390.97, and the AIM All-Share closed down 2.79 points, or 0.3%, at 847.25.

The Cboe UK 100 ended down 0.4% at 769.63, the Cboe UK 250 closed down 0.5% at 16,929.15, and the Cboe Small Companies ended down 0.4% at 13,483.95.

At a speech in New York on Monday, Huw Pill said that inflation in the UK is "too high" and that returning UK inflation to its 2% target on a "lasting and sustainable basis" was "essential".

The chief economist explained that a "distinctive context" within UK of higher natural gas prices, a tight labour market, adverse labour supply developments and goods market bottlenecks creates the potential for inflation to be "more persistent."

"It is therefore in this nexus that I focus in coming to my own assessment of the risks surrounding inflation persistence, which – consistent with the [monetary policy committee]'s collective communication – will strongly influence my monetary policy position in the coming months," he added.

The pound was quoted at USD1.2146 at the London equities close on Tuesday, lower compared to USD1.2203 at the close on Monday.

In the FTSE 100, Admiral Group was the best blue-chip performer, finishing 2.8% higher after Deutsche Bank raised the insurer to 'buy' from 'hold'.

Meanwhile, Next dropped 3.1% after Investec cut the clothing and homewares retailer to 'hold' from 'buy'.

RS Group fell 4.8% despite saying it expects its annual outturn to be at the top end of consensus which ranges from between GBP2.71 billion to GBP3.04 billion for revenue and between GBP350.4 million to GBP374.9 million for adjusted pretax profit.

The industrial and electronics products distributor said like-for-like revenue grew 8% year-on-year in the third quarter ended December 31. However, growth slowed from 15% in the second quarter and 18% in the first.

Plus500 climbed 4.6% as it said it performed in line with expectations in 2022, despite seeing lower levels of trading activity across financial markets as the year drew to a close.

The FTSE 250 firm said trading volumes were hurt by the FIFA World Cup, consistent with previous World Cup tournaments.

Still, annual revenue grew 16% to about USD832 million from USD718.7 million in 2021. Customer income, a key tracker of Plus500's underlying performance, fell 9.1% to USD639 million in 2022, from USD702.8 million in 2021.

Looking ahead, Chief Executive Officer David Zruia said: "We continue to diversify and develop our business as a global multi-asset fintech group, supported by on-going growth investments in a number of areas, ensuring Plus500 remains well-positioned to deliver sustainable growth over the medium to long-term."

Clarkson plunged 8.2% after HSBC cut the shipping services provider to 'hold' from 'buy'.

Elsewhere in London, SIG rose 3.5%. The building products firm said underlying operating profit almost doubled last year, as it prepares for life under new Chief Executive Gavin Slark, who joins at the start of next month.

The Sheffield-based company said like-for-like sales rose 17% annually in 2022, with Poland and Benelux countries growing the most and UK and France the least. Revenue amounted to GBP2.74 billion, up from GBP2.29 billion in 2021.

SIG said underlying operating profit jumped to GBP80 million from GBP41 million.

The dollar staged a recovery on Tuesday, following hawkish comments by two top US Federal Reserve officials on Monday.

The euro stood at USD1.0724 at the European equities close on Tuesday, lower against USD1.0749 at the same time on Monday.

Against the yen, the dollar was trading at JPY132.29, higher compared to JPY131.88 late Monday.

San Francisco Fed boss Mary Daly said rates would likely go above 5% before the policy board decides to stop lifting. Atlanta Fed President Raphael Bostic tipped a similar rate level and added that they would not be changed for "a long time".

"We are just going to have to hold our resolve," Bostic told the Atlanta Rotary Club on Monday. "I am not a pivot guy. I think we should pause and hold there, and let the policy work."

The remarks by Daly and Bostic put the focus onto US Federal Reserve Chair Jerome Powell.

Powell stressed the need for central bank independence as it tackles high inflation but didn't give any explicit hint about the Fed's policy direction.

In a speech delivered in Stockholm, Powell said that the absence of direct political control over the central bank's decisions allows it to take "necessary measures without considering short-term political factors".

He said: "Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy."

Later this week, investors will be looking to the release on Friday of the US consumer price index for December, which will be a key input to the Fed's next policy meeting.

For analysts at Brown Brothers Harriman, the dollar will remain under pressure until a more hawkish Fed narrative emerges.

Stocks in New York were mixed at the London equities close, with the DJIA down 0.1%, the S&P 500 index down 0.1%, and the Nasdaq Composite marginally higher.

In European equities on Tuesday, the CAC 40 in Paris ended 0.6% lower, while the DAX 40 in Frankfurt ended down 0.1%.

Brent oil was quoted at USD79.74 a barrel at the London equities close Tuesday, down from USD80.46 late Monday. Gold was quoted at USD1,875.50 an ounce, a touch higher against USD1,874.24.

In Wednesday's UK corporate calendar, there are trading statements from clothing retailer JD Sports Fashion, miner Ferrexpo, and house builder Barratt Developments.

The economic calendar has EU balance of payments at 0900 GMT.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

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