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LONDON MARKET MIDDAY: UK inflation slowdown lifts retail and property

15th Nov 2023 12:08

(Alliance News) - Stock prices in London were higher at midday on Wednesday, as investors reacted to a rapid slowdown in the UK annual inflation rate last month, alongside a cooling of US consumer price pressure and favourable data out of China too.

The FTSE 100 index was up 71.66 points, 1.0%, at 7,512.13. The FTSE 250 was up 245.40 points, 1.3%, at 18,781.53, and the AIM All-Share was up 6.88 points, 1.0%, at 716.60.

The Cboe UK 100 was up 0.8% at 749.71, the Cboe UK 250 was up 1.5% at 16,298.00, and the Cboe Small Companies was up 0.3% at 13,235.66.

In European equities, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5%.

UK consumer price inflation cooled dramatically last month, undershooting the Bank of England's forecasts, and sealing a victory for Prime Minister Rishi Sunak in his goal to halve inflation by the end of the year.

The Office for National Statistics said UK consumer prices rose 4.6% annually in October, dropping sharply from the 6.7% pace in September. The reading was lower than the market consensus of 4.8%, as cited by FXStreet, which was also the forecast from the Bank of England.

The annual rate was the lowest since October 2021, the ONS noted.

The data has helped to reinforce the market's expectation that UK interest rates have peaked, and driven expectations that cuts could be sooner than previously thought.

"Prime Minister Rishi Sunak's goal of halving inflation this year has been achieved ahead of schedule. While he is likely to claim the drop in inflation as a win for his government, it has mostly been driven by factors outside of Sunak's control such as the drop in energy prices after last year's spike following Russia's invasion of Ukraine, price cuts from supermarkets, restaurants and hotels to boost demand amid the sluggish consumer backdrop, and rising interest rates from the Bank of England that have encouraged saving and deterred spending and borrowing in the economy," interactive investor analyst Victoria Scholar commented.

In London's FTSE 100, stocks in interest-rate sensitive sectors got a boost. Retailers rose as an easing of inflation means less of a squeeze on consumer pockets. JD Sports rose 2.3%, and Primark-owner AB Foods added 1.2%.

Housebuilder Taylor Wimpey and property portal Rightmove both rose 1.7%. London-listed property firms had also surged on Tuesday in the wake of a similarly favourable US inflation reading.

This put downward pressure on the dollar, however, with investors believing the Federal Reserve has already enacted its final interest rate hike for this cycle of monetary policy tightening.

Pressure on the dollar continued on Wednesday, though the cooler UK inflation data, which took some sting out of BoE interest rate expectations, meant the pound did not top the USD1.25 mark for too long. It breached that level for the first time since mid-September on Tuesday.

Sterling was quoted at USD1.2465 at midday on Wednesday, lower than USD1.2475 at the London equities close on Tuesday. The euro traded at USD1.0862, up from USD1.0855. Against the yen, the dollar was quoted at JPY150.40, down versus JPY150.85.

The US retail sector comes into focus later. There is a US retail sales print at 1330 GMT, at the same time as producer price index data.

Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.4%, and the Nasdaq Composite up 0.5%.

Back in London, Experian jumped 7.1%.

The data analytics and consumer credit reporting firm said pretax profit in the six months to September rose 48% year-on-year to USD763 million from USD517 million, on revenue that rose around 5% to USD3.42 billion from USD3.25 billion.

It soothed some investor concern after numbers from peers TransUnion and Equifax underwhelmed last month.

SSE rose 2.1%, after the energy firm said it swung to a pretax profit of GBP573.3 million in the six months that ended September 30 from a loss of GBP511.0 million a year prior.

Revenue fell 15% to GBP4.79 billion from GBP5.63 billion. Cost of sales came in 46% lower at GBP3.29 billion compared to GBP6.13 billion, more than offsetting a rise in operating costs, which more than doubled to GBP847.9 million from GBP396.0 million.

Also on the up, miners Anglo American and Glencore rose 4.9% and 4.1% on the back of positive data out of China, a big buyer of minerals.

Chinese retail sales grew by more than expected, boosted by an extended holiday at the start of the month. Retail sales jumped 7.6% on-year in October, according to the National Bureau of Statistics, up from September's 5.5% and the highest growth since May. It was ahead of the market consensus of 7.0%, as cited by FXStreet.

Meanwhile, industrial production growth in October crept up to 4.6%, beating forecasts that it would mean unchanged from September's 4.5%.

Among London-listed mid-caps, Genuit rose 11%, after it said it expects to achieve full-year adjusted operating profit "marginally above" market expectations of GBP89.7 million.

The provider of water, climate and ventilation systems for buildings and infrastructure said performance was supported by the diversity of its market segment exposure, with revenue in the first 10 months of the year falling 4.8% to GBP504.2 million on a like-for-like basis from the year before.

Elsewhere, Ocean Wilsons rose 13%.

Its maritime services subsidiary in Brazil saw year-to-date third-quarter net revenue climb to USD356.4 million, which is 8.3% higher than the prior year, while profit rose 33% to USD58.5 million.

On AIM, Verici DX surged 62%, after the developer of clinical diagnostics for organ transplants signed an exclusive global licensing agreement with Thermo Fisher to further develop an assay for pre-transplant prognostic testing for the risk of early kidney rejection.

Verici DX said it expects around USD5 million in payments from Thermo Fisher over the next 12 months, with a further payment thereafter, alongside ongoing royalties on tests sold.

Gold was quoted at USD1,973.01 an ounce at midday on Wednesday, higher than USD1,964.57 on Tuesday. Brent oil was trading at USD82.01 a barrel at midday on Wednesday, down from USD83.42 on Tuesday.

By Greg Rosenvinge, Alliance News senior reporter

Comments and questions to [email protected]

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