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London open: Stocks up as sterling weakens ahead of BoE
London stocks rose in early trade on Thursday as sterling weakened ahead of an expected 25 basis point rate hike by the Bank of England.
At 0855 BST, the FTSE 100 was up 0.5% at 7,780.05, while the pound was down 0.4% against the dollar at 1.2576.
A weaker pound tends to boost the top-flight index as around 70% of its constituents derive their earnings from overseas.
Neil Wilson, chief market analyst at Markets.com, said: “The Bank of England will raise rates by 25bps today – inflation remains above 10%, so the situation is way more acute than in the US. Moreover the economic data is holding up much better than forecasts last autumn indicated. I’d expect the Bank to signal more tightening is likely going to be warranted.”
He noted that the Bank said in its March policy statement that if there were to be evidence of more persistent pressures, then further tightening of monetary policy would be required.
“The data since then hardly indicates easing in inflation pressure. Airy fairy guidance to remain,” Wilson said. “The problem the BoE faces is two-fold, neither of which it can do anything about: one is it was too slow in its pace of tightening – there was never a ‘whatever it takes’ philosophy, so it never jumped in front of the inflation steamroller. Two is the mortgage market and a tonne of fixed rate deals rolling off over this year.
“The good news it’s less demand-driven so it will hope it can sit and wait it out. It will hope that the lag of hikes and base effects from energy will do the job now and this 12th hike could be its last. The market probably will think otherwise – but the market keeps ignoring the Fed, too. Remember the BoE is basing whether to hike on forecasts for inflation in two years’ time, not what is coming down the pipe in the coming months. Base scenario is a 25bps, split MPC with maybe 1-2 saying no hike, and growth forecasts revised up.”
The BoE rate announcement is due at midday.
In equity markets, Diploma was boosted by an upgrade to ‘buy’ from ‘hold’ at Jefferies.
Airtel Africa slumped after full-year results, while engine maker Rolls-Royce lost ground as it held annual guidance and said large engine flying hours had hit 83% of 2019 levels in the four months to April 30.
ITV was under the cosh after the broadcaster reported a drop in first-quarter total advertising revenue (TAR) and said the outlook was “challenging” given the current macroeconomic backdrop.
Vodafone was a little lower after announcing a a strategic relationship with shareholder Emirates Telecommunications, also known as e&, which will see the company’s chief executive take a seat on the board.
Petershill Partners, Tesco, HSBC and BP all fell as they traded without entitlement to the dividend.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Relx Plc | +1.75% | +43.00 | 2,506.00 |
| 2 |  |
Tui Ag | +1.65% | +8.80 | 542.00 |
| 3 |  |
Admiral Group Plc | +1.61% | +35.00 | 2,210.00 |
| 4 |  |
Pearson Plc | +1.58% | +12.60 | 809.80 |
| 5 |  |
Gsk Plc | +1.48% | +21.20 | 1,457.60 |
| 6 |  |
Smith & Nephew Plc | +1.47% | +18.50 | 1,275.50 |
| 7 |  |
Sage Group Plc | +1.21% | +9.80 | 817.60 |
| 8 |  |
Astrazeneca Plc | +1.18% | +140.00 | 11,960.00 |
| 9 |  |
Melrose Industries Plc | +1.17% | +5.20 | 449.90 |
| 10 |  |
Smurfit Kappa Group Plc | +1.03% | +30.00 | 2,944.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Itv Plc | -4.30% | -3.32 | 73.80 |
| 2 |  |
Rolls-royce Holdings Plc | -3.45% | -5.40 | 150.90 |
| 3 |  |
Tesco Plc | -2.48% | -6.90 | 271.00 |
| 4 |  |
Anglo American Plc | -2.21% | -54.00 | 2,390.00 |
| 5 |  |
Glencore Plc | -1.84% | -8.20 | 436.95 |
| 6 |  |
Rio Tinto Plc | -1.81% | -90.00 | 4,894.50 |
| 7 |  |
Bhp Group Limited | -1.34% | -31.50 | 2,323.50 |
| 8 |  |
Fresnillo Plc | -1.29% | -9.20 | 703.00 |
| 9 |  |
Vodafone Group Plc | -1.27% | -1.18 | 91.57 |
| 10 |  |
Land Securities Group Plc | -1.26% | -8.00 | 628.60 |
US close: Stocks mixed as consumer inflation slows
Stocks on Wall Street finished in a mixed state on Wednesday, with the Dow and the tech-heavy Nasdaq both recording losses, while the S&P 500 ended higher after the latest inflation figures were released.
The Dow Jones Industrial Average fell 0.22% to close at 33,487.87, while the S&P 500 rose 0.24% to end at 4,129.20.
By the end of trading, the Nasdaq Composite was the biggest loser, declining 0.63% to finish at 12,179.55.
Investors were thumbing through the latest consumer inflation data, which showed prices rising at their slowest pace in two years.
The consumer price index (CPI) print had been eagerly awaited by market participants for clues on the Federal Reserve’s next interest rate move.
On the currency front, the dollar was weaker against its major pairs, last slipping 0.06% on sterling to trade at 79.19p, while it dropped 0.19% against the euro to 91.05 euro cents.
It also declined against the yen, last falling 0.66% to change hands at JPY 134.34.
“It was Mary Poppins who told her bewildered charges that ‘well begun is half done’, and half done is pretty much where the Fed is when it comes to getting a grip on inflation in the US,” quipped Danni Hewson, head of financial analysis at AJ Bell.
“Today’s numbers might have come in cooler than had been expected, and the headline number might have fallen below 5% for the first time in two years, but there is still a yawning gulf between where we are and where US central bankers want to be.
“Core inflation has held steady from last month coming in at 5.5%, despite 10 consecutive interest rate hikes taking borrowing costs to a 16-year high.”
Consumer prices rise at slowest pace in two years
On the economic front, the cost of living in the US increased as expected in April, though it reached the slowest pace of gains in two years in the process, according to the Department of Labor.
The country’s consumer price index, adjusted for seasonal variations, grew at a month-on-month rate of 0.4%, in line with market expectations.
On an annual basis, the rate of increase fell to 4.9% from 5.0%.
Core CPI, meanwhile, which excludes food and energy, rose 0.4% month-on-month and 5.5% year-on-year, which was a drop from the 5.6% pace seen in the prior month.
Food prices remained unchanged compared to the previous month, while energy prices increased 0.6%.
Prices for used cars and trucks rebounded by 4.4% at the core level.
However, the rate of increase in housing prices slowed further, rising by 0.4% over the month following a 0.6% rise in March.
Prices for new vehicles decreased 0.2%, while transportation services and medical care services fell by 0.2% and 0.1%, respectively.
Ian Shepherdson at Pantheon Macroeconomics judged that core inflation using the Federal Reserve’s preferred price gauge appeared to be breaking lower.
“Core services prices ex-rent rose only 0.11% in April, the smallest increase since July last year,” he said.
“This means the equivalent measure in the core PCE deflator, which the Fed is now watching very closely, is set for a third straight relatively benign reading.
“The trend appears to be breaking to the downside, and if that continues – as we expect – and the labour market softens, as implied by all the leading indicators, the Fed’s line of no rate cuts this year will soon become indefensible.”
Across the pond, inflation in Germany declined slightly in April, although high food prices prevented it from falling further.
According to the Destatis federal statistics office, the country’s CPI increased 7.2% in April compared to the same month last year, down from the 7.4% print in March.
The outcome matched Destatis’ initial flash estimate, as well as market expectations.
NYT publisher slides as Wendy’s serves up decent quarter
In equities, shares of the New York Times Company fell 7.76%, driven by the publisher’s announcement of slowed second quarter ad growth.
Walt Disney was meanwhile down 1.02%, ahead of the entertainment giant’s scheduled second-quarter results due after the closing bell in New York.
On the upside, burger peddler the Wendy’s Company added 1.04% following better-than-expected first-quarter sales, profits and like-for-like figures.
Thursday newspaper round-up: Inflation, Post Office, public sector
Rishi Sunak is at risk of missing his flagship target to halve inflation this year, one of Britain’s leading economic forecasters has warned, as households are left thousands of pounds worse off amid the cost of living crisis. Sounding the alarm over the hit to living standards, the National Institute of Economic and Social Research said the soaring price of food and other basic essentials meant inflation was on track to remain persistently high for the rest of this year. – Guardian
The Post Office is facing a government investigation after paying bonuses to executives for supplying evidence to the public inquiry into the Horizon computer system scandal. Kevin Hollinrake, the business minister, has demanded an “immediate explanation” from the Post Office after parts of chief executive Nick Read’s £450,000 bonus were linked to providing “all required evidence and information on time”. – Telegraph
Britain’s bloated public sector is nearly twice as large as official figures suggest, economists have said, after the Tories failed to stem its relentless growth over the past 13 years. Analysis by the National Institute of Economic and Social Research (Niesr) suggests that around 10.6m people are employed by the state – far more than the 5.7m typically cited by the Government. – Telegraph
Shares in Carl Icahn’s conglomerate fell sharply after it revealed that federal prosecutors had been in touch to request information a day after a short-seller alleged that it was operating a “Ponzi-like economic structure”. The veteran American activist investor has forcefully pushed back against the report from Hindenburg Research, pledging to “vigorously defend” his business and branding the criticism “fundamentally flawed”. – The Times
About 1.6 million households and businesses were paid a total of almost £11 million under a scheme that rewarded them for cutting their power usage at peak times last winter. National Grid, the company responsible for keeping the nation’s lights on, said the energy savings under the “demand flexibility service” were equivalent to the amount of electricity needed to supply about 10 million homes for an hour. – The Times
