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LONDON MARKET MIDDAY: Europe buoyant amid hope US inflation has peaked

11th Jan 2023 12:13

(Alliance News) - The FTSE 100 in London hit another multi-year high on Wednesday, as investors grew increasingly confident on the day before of a key US inflation reading.

The FTSE 100 index was up 49.36 points, or 0.6%, to 7,743.85 at midday. The blue-chip index hit a high of 7,749.88 on Wednesday morning, its best level since early August 2018.

The FTSE 250 climbed 216.18 points, or 1.1%, to 19,607.15, having started the day lower. The AIM All-Share was 4.15 points, or 0.5%, higher at 851.40.

The Cboe UK 100 was up 0.6% at 774.42, the Cboe UK 250 added 0.8% at 17,055.69, and the Cboe Small Companies was up 0.5% at 13,822.09.

In European equities on Wednesday, the CAC 40 in Paris rose 1.0% and the DAX 40 in Frankfurt was up 1.1%.

Stocks in New York were called higher. The Dow Jones Industrial Average was called to open up 0.1%, and the S&P 500 and Nasdaq Composite were both called up 0.2%.

"It helped that a speech by Federal Reserve Chair Jerome Powell yesterday didn't contain any shocks which would cause investors to worry about markets even more," AJ Bell analyst Russ Mould commented.

Powell avoided monetary policy detail in a speech in Stockholm, talking instead about the importance of central bank independence.

The Fed chief's speech was one hurdle for markets to jump over this week. Thursday's US consumer price index reading is another.

Equity investors will be hoping December's annual inflation reading comes in at or below the FXStreet-cited market consensus of 6.5%, which would be a slowdown from 7.1% in November.

With 24 hours to go before the data, the dollar was mixed.

The pound traded at USD1.2130 midday Wednesday in London, down from USD1.2146 late Tuesday. The euro climbed to USD1.0751 from USD1.0724. Against the yen, the dollar rose to JPY132.56 from JPY132.29.

"But the dollar bias is lower. Business surveys point to a slowing US economy and, if inflation allows, the Fed will be in a position to ease policy later this year," analysts at ING commented.

ING said that commodity currencies, the Australian dollar for example, are ones to watch. The US dollar fell to AUD1.4481 on Wednesday afternoon UK time, from AUD1.4534 a day earlier.

"Commodity markets remain bid on the China rebound story," the Dutch bank said.

Brent oil was quoted at USD80.46 a barrel midday Wednesday in London, up from USD79.74 late Tuesday. Gold traded at USD1,884.17 an ounce, rising from USD1,875.50.

The China "rebound" supported oil, while a somewhat weaker dollar helped gold. Gold has an inverse relationship with the greenback.

The prospect of greater demand from China also supports the mining sector, major constituents in London's FTSE 100. Among them, Antofagasta rose 2.1%, one of the best blue-chip performers at midday.

JD Sports was the index's best performer. It said revenue growth quickened in the run-up to Christmas, with the athleisure retailer now expecting annual profit at the top end of market expectations. Shares surged 6.3%.

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.

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

A poor day for insurers prevented the FTSE 100 from achieving a stronger gain. Phoenix Group fell 2.0%, and Aviva gave back 3.7%. Admiral was the worst of the lot, shedding 8.4%.

Admiral share price slide came after FTSE 250-listed peer Direct Line said it will skip its final dividend, as it counts the cost of claims from a December cold snap in the UK. Direct Line plunged 26% - the worst of the FTSE 250s.

Direct Line expects claims from the "freeze event" to be roughly GBP90 million in its Home & Commercial arm. Combined with another cold snap around this time last year, as well as developments in the summer, Direct Line expects total weather-related claims of GBP140 million for 2022, almost double its expectation of GBP73 million.

Claims inflation remains a "feature" in Direct Line's Motor arm, meanwhile. With the absence of a final payout, Direct Line's total dividend for the year will amount to 7.6 pence, down from 22.7p in 2021.

Motor insurer Sabre Insurance fell 2.4% in a negative read-across.

Darktrace was 14% lower. The cybersecurity firm lowered growth guidance, warning tough trading conditions will "temper" its expectations.

For the financial year ending in June, Darktrace now expects revenue growth of between 30% and 31%, knocked from its previous 30% to 33% outlook.

For the half-year that ended December 31, it expects to report revenue of at least USD258.0 million, growth of at least 35%.

"When Darktrace set its FY 2023 guidance at the start of its financial year, it sought to account for macro-economic uncertainty and the potential impact; late in the second quarter, it became clear that the impact on new customer growth had been larger than expected," the company explained.

On AIM, Deltic Energy soared 46%. Gas has been found at the 41/05a-2 exploration well on licence P2252, located in the southern North Sea, the company announced.

Shell is the operator of the asset, owning a 65% share. Deltic owns 30% and the rest is owned by Dutch exploration firm ONE-Dyas.

Reach shares plunged 28%. The Daily Mirror owner said revenue in the fourth quarter to December 25 dropped 4.2% year-on-year. Annual revenue was 2.3% lower. Not helping its top-line was a 20% year-on-year slump in advertising revenue in the fourth quarter.

Reach said it targeting at least GBP30 million savings in 2023 as it bids to weather "macro pressures". PA, citing a Reach internal email, reported that the newspaper publisher will axe 200 jobs.

By Eric Cunha, Alliance News news editor

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