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LONDON MARKET OPEN: Stocks down amid hotter-than-expected UK inflation

24th May 2023 09:14

(Alliance News) - Stock prices in London opened lower on Wednesday, as a new UK inflation reading came in hotter-than-expected.

The FTSE 100 index opened down 115.62 points, or 1.5%, at 7,647.33. The FTSE 250 was down 18,934.80 points, 1.4%, at 18,934.80, and the AIM All-Share was down 4.50 points, 0.6%, at 803.54.

The Cboe UK 100 was down 1.5% at 763.83, and the Cboe UK 250 was down 1.4% at 16,518.00, but the Cboe Small Companies was up 0.3% at 13,607.07.

The UK consumer prices index rose by 8.7% in April, inflation slowing from 10.1% in March and from a recent peak of 11.1% in October last year. The reading was higher than FXStreet-cited market consensus of 8.2%, however.

On a monthly basis, consumer prices rose by 1.2% in April, speeding up slightly from a 0.8% rise in March.

Core consumer prices, excluding energy, food, alcohol and tobacco, rose by 6.8% annually in April. Market consensus had been expecting the core inflaton reading to be unchanged from 6.2% in March.

In better news on the UK inflation front, ONS data showed a slowing of producer price inflation.

Producer input prices rose by 3.9% in the year to April, cooling from 7.3% in the year to March. Producer prices decreased by 0.3% in April from March, following an increase of 0.2% in March from February.

Joshua Raymond, director of investment platform, said the "disappointing data" will keep pressure on the Bank of England to keep raising interest rates.

"It's now likely that the BoE's [Monetary Policy Committee] will move to hike UK interest rates by another 0.25% at its next meeting in June," he said. "Unfortunately the question marks over the BoE's credibility won't go away with this data set with the UK central bank seemingly behind the curve on UK inflation yet again."

Still ahead in Wednesday's economic diary, there is a UK house price index reading at 0930 BST

Blue-chip housebuilder shares were not performing well ahead of the house price data. Taylor Wimpey was down 4.3%, Persimmon down 4.2%, and Barratt Developments down 3.7%.

In New York on Tuesday, stocks ended lower, as the deadline to resolve the US debt ceiling crisis crept closer with no resolution in sight.

The Dow Jones Industrial Average closed down 0.7%, the S&P 500 down 1.1% and the Nasdaq Composite down 1.3%.

The White House said some progress was made in the latest round of talks with Republican negotiators to avert a catastrophic US debt default before a June 1 deadline.

"We are seeing movement", White House Press Secretary Karine Jean-Pierre told reporters Tuesday afternoon, adding: "Both sides have to understand that they're not going to get everything that they want."

However, Republican Representative Ralph Norman warned that House Speaker Kevin McCarthy had said the two sides were "not anywhere near close" to an agreement.

In the FTSE 100 index, SSE was up 1.4%.

SSE said that revenue in the financial year that ended March 31 rose to GBP12.49 billion from GBP8.70 billion a year earlier.

However it swung to a pretax loss of GBP205.6 million from a pretax profit of GBP3.48 billion a year ago. SSE explained that the loss was due to net GBP2.3 billion adverse fair value movement on derivatives.

SSE proposed a final dividend of 67.7p, bringing the full year dividend to 96.7p, up versus 85.7p year-on-year.

In the FTSE 250, Marks & Spencer jumped 8.7%.

In the 52 weeks ended April 1, revenue rose by 9.6% to GBP11.93 billion from GBP10.89 billion a year earlier. Pretax profit rose by 21% to GBP475.7 million from GBP391.7 million.

Marks & Spencer said that it plans to restore its dividend in financial 2023.

"One year in, our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share. Our Food and Clothing & Home businesses invested in value to protect customers from the full force of inflation which, whilst impacting margin, was the right thing to do, as serving our customers well is the only route to delivering for our shareholders," said Chief Executive Stuart Machin.

LondonMetric shares lost 10%.

The London-based property company said it has agreed to buy CT Property Trust in an all-share deal worth GBP198.6 million. LondonMetric will issue 0.455 of a LondonMetric share for each CTPT share, giving CTPT shareholders a 9.7% stake in LondonMetric.

LondonMetric also reported net rental income in the financial year that ended March 31 rose to GBP144.1 million from GBP130.0 million a year earlier. It swung to a loss per share of 51.8p from an EPS of 78.8p. The company declared a dividend of 9.50p, up from 9.25p.

CEO Andrew Jones said: "The last year has seen a weaker economic backdrop, elevated inflation and a significantly higher interest rate environment. Not surprisingly, this has led to a recalibration of real estate values and conditions that have undoubtedly impacted our approach to leverage and interest rate exposure."

LondonMetric also said it has sold its DHL logistics warehouse in Solihull for GBP20.5 million. It noted that the sale was at a small premium to the March 31 book value.

In European equities on Wednesday, the CAC 40 in Paris was down 1.5%, while the DAX 40 in Frankfurt was down 1.3%.

The pound was quoted at USD1.2410 early on Wednesday in London, down a little compared to USD1.2420 at the equities close on Tuesday. The euro stood at USD1.0784, firm against USD1.0774. Against the yen, the dollar was trading at JPY138.56, firm from JPY138.52.

In Asia on Wednesday, the Nikkei 225 index in Tokyo closed down 0.9%. In China, the Shanghai Composite was down 1.3%, while the Hang Seng index in Hong Kong was down 1.9%. The S&P/ASX 200 in Sydney closed down 0.6%.

Brent oil was quoted at USD77.32 a barrel early in London on Wednesday, up from USD77.00 late Tuesday. Gold was quoted at USD1,974.23 an ounce, up against USD1,965.99.

By Sophie Rose, Alliance News reporter

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