15th Dec 2021 07:44
(Alliance News) - Stock prices in London are seen opening lower on Wednesday, as traders digest news that the UK's inflation raced above 5% for the first time in over 10 years.
It means pressure is mounting on the Bank of England, which holds a key monetary policy meeting on Thursday.
"Unfortunately for consumers, peak inflation may still be a few months off. Today's CPI data only serves to increase the pressure on the Bank of England to raise interest rates at its MPC meeting tomorrow," Quilter Cheviot analyst Richard Carter commented.
IG futures indicate the FTSE 100 index is to open 15.7 points, 0.2%, lower at 7,204.14. The blue-chip index closed down 12.80 points, 0.2%, at 7,202.94 on Tuesday.
The pound was quoted at USD1.3248 early Wednesday following the CPI data, up from USD1.3231 at the London equities close on Tuesday.
The euro stood at USD1.1269, soft on USD1.1275. Against the yen, the dollar was trading at JPY113.70, unchanged from the London equities close on Tuesday.
In early UK corporate news, meanwhile, distribution firm Bunzl said it expects single-digit annual revenue growth, GlaxoSmithKline shared promising data from its Covid-19 booster and electrical goods firm Currys warned its market has been "softer" in recent weeks.
Inflation in the UK raced above 5% in November, numbers on Wednesday showed, ahead of a crunch Bank of England meeting on Thursday.
The UK's annual inflation rate accelerated to 5.1% in November, from 4.2% in October, according to the Office for National Statistics. The Bank of England's inflation target is 2%.
November's figure was above market estimates of 4.7%, according to FXStreet.
"This is the highest CPI 12-month inflation rate since September 2011, when it stood at 5.2%," the ONS said.
"Inflation may stay around 5.0% for about six months and may even nudge up a bit further in April 2022. But we still think it will start to fall sharply from June 2022, perhaps to quite close to 2.0% by the end of 2022. So while the Bank of England won't be able to ignore the inflation backdrop for long (we wouldn't completely rule out a hike tomorrow), we doubt it will raise interest rates next year as far as the 1.00% level priced into the markets," analysts at Capital Economics commented.
Producer price growth, meanwhile, similarly topped estimates in November, surging 9.1% yearly, versus expectations of an 8.3% hike. October's growth was upwardly revised to 8.6%.
On the London Stock Exchange, Bunzl said it expects to post a "strong performance in 2021". Underlying revenue growth will be in the "high single digit" level compared to 2019, before the onset of the pandemic.
Revenue in 2021 is tipped to rise 2% year-on-year at actual exchange rates, and 7% on a constant currency basis.
"At constant exchange rates, underlying revenue growth is expected to reflect a strong recovery in the base business, supported by inflation, partially offset by the anticipated decline in Covid-19 related orders with deflation on certain Covid-19 related products. Group adjusted operating margin is expected to be only slightly ahead of historical levels," the company said.
Bunzl noted uncertainty related to new Covid-19 variants, but added that it expects revenue to increase in 2022. However, it warned sales of Covid-19 related products could moderate.
"Continued recovery of the base business is expected to be offset by the further normalisation of sales of Covid-19 related products, albeit these are expected to remain ahead of 2019 levels. Similarly, we expect the continued normalisation of group operating margins in 2022 to more historical levels, as the mix of sector and product sales returns to more typical levels for the group," the company explained.
GlaxoSmithKline, developing a Covid-19 jab alongside French firm Sanofi, said a single booster dose of the vaccine delivered "consistently strong immune responses".
Neutralising antibodies increased in the 9- to 43-fold range, GSK said, regardless of which initial jab the patient took, be it AstraZeneca's, J&J's, Moderna or Pfizer's.
"The booster was well tolerated, with a safety profile similar to currently approved Covid-19 vaccines. This is the most comprehensive booster trial to date to explore boosting across different vaccine technologies used for primary vaccination," GSK added.
The companies plan to file the booster data with regulators following full phase III results.
Among mid-caps, Currys said it has seen "strong UK market share gains", despite supply chain challenges.
In the half year to October 30, revenue fell 1.5% annually to GBP4.79 billion from GBP4.86 billion. Pretax profit, however, inched up 6.7% to GBP48 million from GBP45 million, helped by net finance costs dropping 15% to GBP47 million.
"We've had a strong first half of the year. We grew colleague engagement and customer satisfaction, gained market share and stabilised gross margins in the UK, grew profits and generated strong cash flow," Chief Executive Alex Baldock said.
The company, which announced plans for a GBP75 million buyback in November, said the programme will begin in January.
Currys declared an interim payout of 1.00 pence per share, having not paid one a year earlier.
An increased dividend, along with a return of surplus cash and a pledge to invest in the business, are among its "refreshed capital allocation priorities".
Looking ahead, CEO Baldock added: "Our market has been softer over recent weeks, and we may face into further headwinds from omicron and associated restrictions, but the stronger business we've built can ride out both the industry-wide disruption to supply chains and bumpy demand. After the strong first half, we remain on track to meet the expectations we set out a month ago for full year adjusted pretax profit of around GBP160 million."
Tokyo's Nikkei 225 inched up 0.1%. The Shanghai Composite ended down 0.4%, while the Hang Seng in Hong Kong was 0.9% lower in late trade. The S&P/ASX 200 in Sydney fell 0.7%.
Gold stood at USD1,767.83 an ounce early Wednesday, down from USD1,775.45 late Tuesday. Brent oil was quoted at USD72.89 a barrel, down from USD73.23.
Still to come on Wednesday are US retail sales numbers at 1330 GMT.
By Eric Cunha; [email protected]
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