15th Jan 2025 11:52
(Alliance News) - Stock prices in London were mostly higher at midday on Wednesday following the morning's surprisingly substantial slowdown in consumer price inflation.
The consumer price index rose 2.5% in December from a year before, slowing from a 2.6% annual increase in November. The FXStreet-cited market consensus had expected inflation to pick up to 2.7%.
"A surprise pullback in the rate of [UK] inflation has given joy to investors," commented AJ Bell's Russ Mould. "It strengthens the argument for the Bank of England to continue cutting interest rates and that's fired up shares in housebuilders in the hope that mortgage rates will go down and more people will be able to afford to get onto the housing ladder."
He added: "The inflation reading has also helped to lower bond yields, with the 10-year gilt easing back a little to 4.841%, which will be welcomed with open arms by the under-fire chancellor, Rachel Reeves.
"However, the prospect of higher costs for companies this year still threatens to drive up inflation if they decide to raise prices, which means people's living standards won't suddenly improve because of today's inflation reading."
The FTSE 100 index was up 59.10 points, 0.7%, at 8,260.64. The FTSE 250 was up 280.98 points, 1.4%, at 20,047.25, and the AIM All-Share was up 3.48 points, 0.5%, at 711.29.
The Cboe UK 100 was up 0.7% at 828.10, the Cboe UK 250 was up 1.7% at 17,448.24, and the Cboe Small Companies was slightly down at 15,266.90.
On the FTSE 100, miner Anglo American was the biggest loser with a 1.7% decrease.
"RBC slashed its rating on the mining company to 'underperform'," Mould noted. "Changes to broker ratings have been having a big impact on stocks so far this year as analysts and investors reappraise the outlook for companies and how that relates to equity valuations."
On the FTSE 250, Currys jumped 11%.
The electricals retailer expects adjusted pretax profit between GBP145 million and GBP155 million for financial 2025, ahead of a company-compiled market consensus of GBP140 million. Also, it continues to expect growth in free cash flow for the year.
Reflecting the strong cash flow performance and continued business momentum, Currys intends to resume dividend payments, with a final dividend of around 1.3 pence per share expected to be announced alongside full-year results in July.
"The true sign of a turnaround story reaching its maturity is the resumption of dividends and Currys has finally reached this status," Mould said, adding: "In an environment where consumers continue to watch every penny, it's impressive that Currys has managed to report a good festive trading period...Currys has also cemented its reputation as the go-to place to get help when technology goes wrong."
Among small caps, fast fashion retailer Asos was up 4.5%.
"Asos continues to reshape its business after going off the boil in recent years," Mould commented. "A US distribution centre will be mothballed as it revamps its network for getting products from A to B. While this involves writing off a significant amount of money already spent on the facility, investors won't be surprised given it is having to make tough decisions to get the business back on track."
In other UK news, annual house price growth in the UK accelerated to reach 3.3% in November from 3.0% in October, Office for National Statistics data showed. This took the average UK property value in November to GBP290,000.
In the 12 months to November 2024, average house prices increased 3.0% on-year in England to GBP306,000, by the same rate in Wales to GBP219,000, and by 4.7% in Scotland to GBP195,000, 4.7%.
"With mortgage rates still elevated, all eyes will be on the Bank of England, with many hoping for a rate cut at the next meeting in February," said Iain McKenzie, chief executive of the Guild of Property Professional. "This should spur sentiment in the market and will hopefully have a knock-on effect on mortgage rates. Many are expecting a few rate cuts throughout 2025, but the frequency will depend on inflation playing its part."
In European equities on Wednesday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.7%.
France's CPI was up 1.3% on-year in December, leaving the pace of inflation unchanged from November. On a harmonised level, allowing for EU-wide comparison, annual CPI inflation picked up to 1.8% in December from 1.7% in November.
Germany's economy shrank a bit less in 2024 than in 2023, data published by the Federal Statistical Office showed.
In 2024, gross domestic product declined by 0.2%, in line with the FXStreet-cited consensus, slowing from a fall of 0.3% in 2023.
The pound was quoted higher at USD1.2227 at midday on Wednesday in London, compared to USD1.2202 at the equities close on Tuesday. The euro stood slightly higher at USD1.0304, against USD1.0295. Against the yen, the dollar was trading lower at JPY156.90 compared to JPY157.95.
Stocks in New York were called higher. The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite were all called up 0.2%.
"Donald Trump's return to the White House next week has major implications for people's money," said AJ Bell's Dan Coatsworth. "Whether that's investments in the stock market, government bonds, cash in the bank and even holiday money, his policies have far-reaching consequences."
He noted: "The US stock market initially responded favourably to the election result last November but recent headwinds have curtailed some of the Trump-related gains...There is a big risk that investors have now priced in a lot of potential good news and that markets don't do as well once Trump is back in power."
Coatsworth continued: "Tariffs are the big unknown with regards to Trump...The latest speculation is that [his] economic team might consider a ramp-up in trade tariffs rather than going straight in guns a-blazing. Markets would like such an approach as it gives companies on the receiving end of tariffs more time to consider their options, and it could also mean a slower increase in inflation."
Brent oil was quoted lower at USD79.37 a barrel at midday in London on Wednesday from USD79.84 late Tuesday.
Gold was quoted higher at USD2,685.65 an ounce against USD2,673.07.
Still to come on Wednesday's economic calendar are three US releases, the most notable of which is consumer price inflation.
By Emma Curzon, Alliance News reporter
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