20th Nov 2024 12:10
(Alliance News) - Stock prices in London were mixed heading into Wednesday afternoon, with the FTSE 100 underwhelming after a hotter-than-forecast UK inflation reading.
Housebuilders struggled following the lofty consumer price index reading, though it was strong day for enterprise software firm Sage, and for water utilities roughly a month before a key regulatory event in the sector.
The FTSE 100 index climbed just 3.66 points at 8,102.68. The FTSE 250 fell 59.75 points, 0.3%, at 20,367.87, and the AIM All-Share was up 1.04 points, 0.1%, at 725.27.
The Cboe UK 100 was flat at 814.74, the Cboe UK 250 was down 0.4% at 17,849.32, and the Cboe Small Companies was 0.3% lower at 15,695.01.
In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt each added 0.2%.
The pound fell to USD1.2659 early Wednesday afternoon in London, from USD1.2676 at the time of the London equities close on Tuesday.
Versus the dollar, the euro fell to USD1.0555, from USD1.0590 late Tuesday afternoon. Against the yen, the dollar rose to JPY155.81 from JPY154.21.
UK consumer price inflation accelerated at a faster pace than expected last month, spurred on by electricity and gas prices, numbers on Wednesday showed.
According to the Office for National Statistics, the rate of annual consumer price inflation picked up to 2.3% in October, back above the Bank of England's target, from 1.7% in September.
The latest reading topped the FXStreet cited consensus of 2.2%.
The ONS said the largest contributor to the inflation rate stemmed from "housing and household services, mainly because of electricity and gas prices".
Consumer prices rose 0.6% in October from September, beating expectations of a 0.5% rise. In September, prices were flat from August.
Excluding food and energy, the annual core inflation rate accelerated slightly to 3.3% last month from 3.2% in September.
The services inflation rate, one closely-watched by BoE policymakers, edged up to 5.0% in October from 4.9% in September.
AXA Investment Managers analyst Gabriella Dickens noted the headline inflation reading was a touch above what the BoE expected in its projections earlier this month. The services data was in line with the BoE forecast, however.
"Overall, while today's data added to our expectation that rates will be left unchanged in December, we think they are in keeping with the gradual pace of reduction outlined by the Bank in recent commentary. We see four 25bps cuts in 2025, one per quarter, leaving Bank Rate by 3.75% by end-2025," Dickens added.
"Policymakers at the bank have continuously stated that they need to see faster services disinflation to be able to ramp up the pace of cuts from the current 25bps per quarter, so the latest data looks likely to prevent them from pushing ahead with another cut in December. But the good news is that October's increase in services inflation was largely due to volatile items; underlying services price pressures do still appear to be easing."
Housebuilders traded lower as the data reinforced expectations of gradual BoE cuts. Vistry fell 6.5%, while Barratt Redrow shed 2.4%.
Sage Group jumped 19%. It announced a GBP400 million share buyback and said strong sales in its Cloud business had boosted annual revenue.
Pretax profit in the year to September 30 climbed 51% to GBP426 million from GBP282 million. Revenue was up 6.8% at GBP2.33 billion from GBP2.18 billion.
Severn Trent rose 2.7% as the water utility said half-year profit doubled. It also announced a chunkier dividend and pledged a record year for capital investment.
Pretax profit on ordinary activities more than doubled to GBP192.3 million in the first half ended September 30 from GBP70.7 million the previous year. Revenue rose 4.5% to GBP1.22 billion from GBP1.17 billion.
Severn Trent is on track for its highest-ever year of capital investment with the company targeting the upper end of its GBP1.3 billion to GBP1.5 billion guidance range. In the first half, capital investment was up 40% on-year at GBP665.9 million from GBP476.9 million.
Eyes are now on the final announcement of a UK regulatory framework for the sector.
Severn Trent added: "As we head into the final few months of the AMP7 regulatory period, the business is stronger than ever and we are looking forward to a successful AMP8. The draft determination we received in July provided significant clarity to AMP8, confirming at least 28% real RCV growth, base costs broadly in line with our business plan, and new protection mechanisms on energy costs and business rates."
The final determination is due to be received on December 19.
Elsewhere in London, model train maker Hornby declined 3.9%. Half-year revenue increased but its loss stretched ahead of the key Christmas trading period.
Its pretax loss in the six months to September 30 widened to GBP5.1 million from GBP4.9 million a year prior, despite revenue rises 10% on-year to GBP25.0 million from GBP22.7 million.
"For now, our order book is looking strong as we approach peak trading, and we have a whole host of new initiatives and activities in place for the run up to Black Friday and through the all-important festive period," Hornby said.
Brent rose to USD73.49 a barrel on Wednesday afternoon, from USD72.93 at the time of the London equities close on Tuesday. Gold traded at USD2,625.51 an ounce, down from USD2,628.26.
US stocks are called to open higher. The Dow Jones Industrial Average is called up 0.2% and the S&P 500 and Nasdaq Composite 0.1% higher.
All eyes will be on Nvidia, which releases annual results after the closing bell in New York on Wednesday.
"Welcome to Nvidia's quarterly earnings day. They report after the bell in what is likely to be the biggest event of the week. With a market cap of USD3.61 trillion and nearly as big as the entire DAX and CAC combined, it's going to be a big event. To give you a scale for their astonishing earnings trajectory over such a short period of time, at the recent lows in Jan 2023 Nvidia earned USD4.4 billion over the preceded last 12 months. However, today, the consensus will see them earn USD61.4 billion over the last 12 months. Then, by the time we hit 2027, they are expected to earn USD118.1 billion," analysts at Deutsche Bank commented.
"There has never been a large cap company like it in the history of financial markets. Last quarter, the revenue outperformance was the smallest relative to expectations in six quarters, so it wasn't the sort of massive beat that Nvidia has often reported over the last couple of years. And in turn, their share price was down 6.38% the following day. However, since then, the share price is up around 20%, so no lasting damage was done."
Nvidia shares were 0.2% higher in pre-market dealings.
By Eric Cunha, Alliance News news editor
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