12th Apr 2016 11:17
LONDON (Alliance News) - Continued strength in oil prices helped lift London stock prices off their lows midday Tuesday, while the pound received a boost after UK consumer price inflation accelerated at the fastest pace in over a year.
Data from the Office for National Statistics showed that the UK consumer price index climbed 0.5% year-on-year in March, faster than the 0.4% forecast and the 0.3% increase seen in February. It was also the biggest increase in prices since December 2014, when CPI also rose 0.5%.
Core inflation, which excludes energy, food, alcoholic beverages and tobacco, accelerated to 1.5% in March from 1.2% in February.
Rises in air fares and clothing prices were the main contributors to the increase, while these upward pressures were partially offset by a fall in food prices. Due to the early timing of Easter, air transport costs surged 23% between February and March.
"To be sure, the recovery in oil prices continuing alongside the ongoing weakening of sterling is likely to provide incremental impetus. However, the pickup this month likely overstates these impacts," said Michael Sawicki, senior economist at Lloyds Bank.
"With measures of underlying unit costs softening in the latest data for Q4 – despite the backdrop of a tightening labour market – the gradient of the inflation uptrend is still likely to remain shallow," he added, saying Lloyds expects a 1% annual inflation rate by the turn of the year.
The pound shot higher against the dollar to trade at USD1.4325 at midday, versus USD1.4260 at the London stock market close on Monday.
The FTSE 100 was up 0.1%, or 5.77 points, to 6,205.89, helped off its lows of the day by a rise in oil prices. Brent hit its highest level of the year so far at USD43.55 a barrel Tuesday, higher than USD42.90 a barrel at the London equities close Monday.
Oil prices were supported after the head of Iraq's state oil company said the world's biggest producers must agree to freeze production in their meeting on Sunday, the Financial Times reported Tuesday.
Ahead of the meeting in Doha, Falah Alamri, director-general of the oil marketing company of Iraq, said: “They should do this deal as this is the only way to support the oil price.”
“Everybody needs it and Iraq supports this deal,” he said.
The meeting in Qatar will bring together countries from de facto OPEC leader Saudi Arabia to Russia and Venezuela to try to freeze output in a bid to end of a world oil glut.
However, IG's Market Analyst Joshua Mahony said oil prices may not be able to hang onto their gains, even if a deal is reached in Doha.
"While markets are clearly preparing for a deal to be struck on Sunday, it remains to be seen whether a production freeze at near record highs will be perceived as a sufficient outcome to provide a sustained rally in crude. It seems highly likely we could see traders buy the rumour and sell the fact given the potential for a disappointment on Sunday," Mahony said.
The FTSE 250 index was flat at 16,771.85, and the AIM All-Share was up 0.4% at 724.33. In Europe, the CAC 40 in Paris was up 0.1% and the DAX 30 in Frankfurt up 0.4%.
Ahead of the open on Wall Street, futures indicated the Dow Jones Industrial Average down 0.1%, the S&P 500 down 0.3% and the Nasdaq 100 down 0.4%.
In individual stock movements, Anglo American was the best performer in the FTSE 100, up 6.2%, and leading a rally in mining stocks. The miner said rough diamond sales for its De Beers unit rose in the third sales cycle against the second.
Anglo said the value of rough diamond sales by De Beers in the third sales cycle hit USD660.0 million, up from USD617.0 million in the second sales cycle for 2016. The continued stability for polished diamond prices has supported a "reasonably positive environment" for rough diamond sales thus far in 2016, the miner added.
Shares in equipment rental firm Ashtead Group, down 3.6%, and pharmaceutical giant AstraZeneca, down 1.2%, were both hit by broker downgrades. HSBC cut Ashtead to Hold from Buy, and Goldman Sachs cut AstraZeneca to Sell from Neutral.
In the FTSE 250, Ted Baker traded down 2.2% at 2,576.00 pence after Panmure Gordon initiated the fashion retailer with a Sell recommendation and 1,902.00p price target. The broker believes the company will be the next one in its sector to "capitulate", following weak like-for-like sales figures from its peers in the last quarter.
Carclo was the best performer in the FTSE All-Share, up 12%. The technical plastics supplier said trading for the year to the end of March was in line with its expectations.
Carclo said its Technical Plastics division has benefited from a much stronger trading performance in the second half of the year, with a good performance in the US and robust demand in the UK. Carclo said its new facility in China is now fully-operational and it is expanding capacity as its sites in Bangalore in India and Tucson, Arizona.
Ferrum Crescent said due diligence has been completed on GoldQuest Iberica and on its lead-zinc projects in Spain and said it will now be focused on securing the necessary funding to exercise its option to buy GoldQuest.
Ferrum holds an exclusive option to acquire 100% of GoldQuest and has until the end of July to exercise that option.
The miner said due diligence has been completed on the Toral and Lago lead-zinc projects that GoldQuest owns in Spain. A geological assessment indicated major potential for re-interpretation of historical data on the prospects, Ferrum said. Shares in the company were up 87% at midday, having more than doubled earlier.
Still ahead on the economic calendar, US import price and export price indices are due at 1330 BST, while the Redbook index is due at 1355 BST. American Petroleum Institute weekly crude oil stock data are due at 2130 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
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AstrazenecaAnglo AmericanCarcloTED.LFerrum CrescentAshtead Group