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London open: Housebuilders pace gains as inflation eases more than expected
London stocks rallied in early trade on Wednesday, with housebuilders pacing the gains after data showed a bigger-than-expected decline in consumer price inflation, easing pressure on the Bank of England to keep hiking rates.
At 0900 BST, the FTSE 100 was up 1.2% at 7,544.84, while sterling was down 0.7% against the dollar at 1.2950.
A weaker pound tends to lift the top-flight index, as around 70% of its constituents derive their earnings from overseas.
Figures released earlier by the Office for National Statistics showed that consumer price inflation fell to 7.9% in the year to June from 8.7% in May. This was the lowest reading since March 2022 and below analysts’ expectations of 8.2%, but remains well above the Bank’s 2% target.
Meanwhile core inflation – which excludes energy, food, alcohol and tobacco – fell to 6.9% from 7.1%, versus expectations for it to remain unchanged.
Neil Wilson, chief market analyst at Markets.com, said the fall in CPI is a “probably a huge relief for Threadneedle St”.
He added: “Core inflation was also down. It doesn’t really matter too much what the finer details are and what the actual number is as far as markets are concerned, it’s all about the direction; and it’s going the right way.”
In equity markets, Persimmon, Barratt, Taylor Wimpey, Berkeley, Redrow and Crest Nicholson all jumped. Property stocks Derwent and Great Portland also gained.
Hargreaves Lansdown was in the black after a well-received trading statement, while luxury car maker Aston Martin was boosted by an upgrade to ‘buy’ from ‘neutral’ at Goldman Sachs.
On the downside, Chilean copper miner Antofagasta fell as it cut its full-year production forecast.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
British Land Company Plc | +7.76% | +25.20 | 350.00 |
| 2 |  |
Persimmon Plc | +7.14% | +78.00 | 1,170.00 |
| 3 |  |
Segro Plc | +7.10% | +52.80 | 796.00 |
| 4 |  |
Land Securities Group Plc | +6.45% | +39.60 | 654.00 |
| 5 |  |
Hargreaves Lansdown Plc | +6.17% | +51.80 | 892.00 |
| 6 |  |
Taylor Wimpey Plc | +6.06% | +6.60 | 115.50 |
| 7 |  |
Barratt Developments Plc | +5.99% | +25.40 | 449.70 |
| 8 |  |
Direct Line Insurance Group Plc | +5.17% | +7.45 | 151.50 |
| 9 |  |
Tui Ag | +4.67% | +27.50 | 616.00 |
| 10 |  |
Admiral Group Plc | +4.08% | +85.00 | 2,166.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Antofagasta Plc | -1.29% | -19.50 | 1,487.50 |
| 2 |  |
Wpp Plc | -0.85% | -7.40 | 866.40 |
| 3 |  |
Rio Tinto Plc | -0.39% | -20.00 | 5,090.00 |
| 4 |  |
Ocado Group Plc | -0.35% | -2.40 | 689.20 |
| 5 |  |
Anglo American Plc | -0.22% | -5.00 | 2,306.00 |
| 6 |  |
Glencore Plc | -0.09% | -0.40 | 453.60 |
| 7 |  |
Bhp Group Limited | -0.04% | -1.00 | 2,339.50 |
| 8 |  |
Shell Plc | -0.00% | -0.00 | 1,894.60 |
| 9 |  |
Nmc Health Plc | -0.00% | -0.00 | 938.40 |
| 10 |  |
Just Eat Plc | -0.00% | -0.00 | 861.00 |
US close: Stocks swell as bank earnings remain in focus
Equities surged on Wall Street on Tuesday, propelling the three major stock indices to levels not seen for 15 months as investors digested some key bank earnings.
At the close, the Dow Jones Industrial Average was up 1.06% at 34,951.93 points, while the S&P 500 gained 0.71% to end the day at 4,554.98.
The tech-centric Nasdaq Composite joined its peers in marking new records, posting a gain of 0.76% to settle at 14,353.64.
In currency markets, the dollar was last down 0.04% on sterling to trade at 76.68p, while it slipped 0.03% against the common currency to 89.03 euro cents.
The greenback also decreased marginally against the yen, last losing 0.01% to change hands at JPY 138.82.
“European and most US stock indices remain in positive territory for the day despite mixed US bank results,” said IG senior market analyst Axel Rudolph earlier.
“Whereas Bank of America and BNY Mellon’s second-quarter results beat estimates on better interest income, investment banking and lower expenses, Morgan Stanley’s profits dropped by 14% due to the global slowdown in deal making and trading.”
Retail sales growth misses expectations, industrial output declines
On the economic front, growth in US retail sales over last month underperformed expectations, despite several sectors recording notable gains.
Contrary to an expected 0.5% increase, the Department of Commerce reported a modest rise of 0.2% in retail sales volumes, amounting to $689.5bn.
The prior month’s growth was retrospectively adjusted up by 0.2 percentage points, to a better-than-initially-reported increase of 0.5%.
When discounting the unpredictable sector of motor vehicles and parts dealers, June’s growth in sales mirrored the overall figure, again at 0.2%, falling short of a projected 0.3%.
The sector also benefited from a two-tenths of a point upward revision to May’s numbers.
Certain sectors experienced substantial growth in June, however, with miscellaneous store retailers leading the way with a 2.0% increase, closely followed by furniture stores at 1.4%, and electronics retailers at 1.1%.
Online sales, or non-store retailers, made the most significant contribution to the overall retail sales volume for the month.
Elsewhere, industrial production contracted by 0.5% in June, starkly contrasting with a predicted increase of 0.1%.
In the housing market, the National Association of Home Builders/Wells Fargo housing market index displayed a slight upward trend, rising from 55 points in June to 56 points in July, matching market predictions.
Banks rise on strong updates, Lockheed Martin dips despite solid earnings
In equities, banks were well and truly in focus, with Bank of America shares swelling 4.42% and Morgan Stanley outpacing that with a 6.45% rise.
The increases were spurred by positive responses to their quarterly earnings updates, with Morgan Stanley going a step further by hiking its quarterly dividend payout.
Regional banking player PNC Financial Services Group also experienced a share price hike, closing 2.51% higher, despite it falling short of its revenue target for the second quarter.
Elsewhere, retail brokerage giant Charles Schwab Corporation rocketed 12.57% on the back of its second-quarter earnings beating market expectations, despite being lower than the same period last year.
On the downside, defence titan Lockheed Martin Corporation dipped 3.04%, even after the firm reported stronger-than-expected earnings for the second quarter and raised its full-year guidance.
Wednesday newspaper round-up: JLR, Meta, BoE staff
The owner of carmaker Jaguar Land Rover (JLR) is expected to announce that it will build an electric car battery gigafactory in the UK, backed with £500m in government funding, in what would be a major boost for the British car industry. Indian conglomerate Tata Group, which owns Jaguar Land Rover, has been locked in negotiations for months to secure state aid for the project, which would aim to produce 40 gigawatt hours (GWh) of batteries a year, enough to power hundreds of thousands of electric cars. – Guardian
Mark Zuckerberg’s Meta is making a commercial version of its artificial intelligence model freely available, in a move that gives startups and other businesses a low-cost opportunity compete with OpenAI’s ChatGPT and Google’s Bard. A new version of a Meta large language model (LLM), called Llama 2, will be distributed by Microsoft through its Azure cloud service and will run on the Windows operating system, Meta said in a blogpost, referring to Microsoft as “our preferred partner” for the release. LLMs underpin generative AI products like the ChatGPT chatbot, although ChatGPT’s owner has not open-sourced – or made widely available to others – its LLM, called GPT-4. – Guardian
One of Asia’s richest families has entered the race for lucrative contracts to transport electricity from Britain’s biggest offshore wind farm back to the National Grid. UK Power Networks Services, which is owned by Hong Kong billionaire Li Ka-shing’s family, is part of a consortium bidding for control of offshore wind cable networks that are worth £2bn overall. – Telegraph
The Bank of England paid out £25m in bonuses to staff over the past year despite warnings from its governor that employers should show “restraint” over wage rises amid soaring inflation. Threadneedle Street confirmed that 429 officials received annual bonuses of more than £10,000 each this year, with some receiving as much as £22,500 each. – Telegraph
Japan’s SoftBank is to invest about $65 million in Tractable, a British artificial intelligence start-up, marking the first major cash injection into a European company from its flagship Vision Fund 2 in more than a year. Tractable develops AI tools that allow insurance companies to assess the state of damage to homes and cars using nothing but digital images. – The Times
