13th Jan 2015 10:54
LONDON (Alliance News) - London stocks are trading higher Tuesday, showing resilience despite lower-than-expected UK inflation figures, further falls in crude oil prices, and renewed concerns about the health of the global economy.
The FTSE 100 is up 0.6% at 6,481.8, helped in part by a buoyant retail sector. The FTSE 250 is up 0.5% at 16,027.02 and the AIM All-Share index is down 0.2% at 702.57.
UK annual inflation fell to 0.5% in December, the lowest level since May 2000 and below expectations for 0.7% as fuel prices tracked the decline in the global price of crude oil. Excluding energy, food, alcohol and tobacco, prices rose 1.3%, up from 1.2% in November.
?UK inflation on a CPI basis undershot expectations for December, coming in at 0.5% year-on-year and driven by a combination of lower food and energy bills," says Guy Ellison, head of UK equities at Investec Wealth & Investment. "The core reading, excluding these more transient factors, actually increased marginally to 1.3% year-on-year and it is this number which the Bank of England should focus on when considering rate policy."
Brent crude touched a near six-year low of USD45.20 early Tuesday, down more than 60% from its summer high of USD115. Mid-morning, Brent is quoted at USD46.07 a barrel, while US benchmark West Texas Intermediate is quoted at USD44.67, up slightly from a new low of USD44.19, a level not seen since mid-March 2009.
"Oil prices are largely dictating play in the financial markets with energy companies acting as a major drag on the markets despite the fact that people are generally in agreement that lower oil prices are actually a net positive for the global economy," says Craig Erlam at Alpari.
Germany's DAX-30 and the CAC-40 in Paris are both up 0.8% in morning trading.
Wall Street is expected to benefit from the positive sentiment. The DJIA, the S&P 500 and the Nasdaq 100 are forecast to open 0.3% higher.
In figures released overnight, China's trade surplus fell to USD49.6 billion in December from November's record high of USD54.48 billion. Economists had expected the trade surplus to decrease to USD49 billion. Exports grew 9.9% year-over-year in December, which was faster than the 6% rise expected by economists, helped by buoyant growth in the US. In November, exports had increased 4.7%.
Imports declined 2.3%, slower than the 6.2% drop forecast by economists as the world's second largest economy took advantage of lower commodity prices and increased import volumes. In November, imports had decreased 6.7%.
"We had expected the sharp falls in the price of oil and other commodities to have weighed more heavily on the value of imports, but it appears that this may have been partly offset by a pick-up in the volume of oil imports as China takes advantage of low prices to add to its strategic reserves," says Julian Evans-Pritchard, China Economist at Capital Economics.
WM Morrison Supermarkets is leading the FTSE 100 higher, up 5.5%. The retailer said Chief Executive Dalton Philips will step down after five years in charge following the retailer's full-year results, as it reported like-for-like sales fell 3.1% in the six weeks to January 4 while total sales excluding fuel fell 1.3%.
The shares of competitors are benefiting as well. J Sainsbury is up 3.5%, Tesco is up 3.2% and Marks & Spencer is 1.9% higher.
Department store operator Debenhams is down 8% despite like-for-like sales in the four weeks over Christmas rising 4.9%, missing expectations, while online retailer ASOS is up 4.5% after reporting a 15% rise in retail sales for the six-week period covering the season, bolstered by double-digit growth in the UK.
Pace is up 4.5% after the technology company said it expects its 2014 profits to be above its previous guidance, with particularly strong revenue growth in the second half of the year thanks partly to new product launches and its acquisition of networks infrastructure company Aurora Networks. The company also said it had recorded "record" revenue in the fourth quarter of 2014, and expects revenue for the year as a whole to be USD2.61 billion. It said it is confident of making "further progress" in 2015 and beyond.
Oil and energy-related stocks are broadly lower, tracking the slide in crude prices. Tullow Oil is down 3.4%, Weir Group is 3.2% lower and Ashtead is off 3%.
Japan's Nikkei closed down 0.6% at 17,087.71 after being closed for Coming of Age Day on Monday. The Hang Seng in Hong Kong ended up 0.8% at 24,215.97, and the Shanghai Composite closed up 0.2% at 3,235.301.
By Ian Edmondson; [email protected]
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