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London open: Stocks nudge up as investors eye inflation data; Smith & Nephew rallies
London stocks nudged higher in early trade on Tuesday as investors erred on the side of caution ahead of key inflation data later this week.
At 0835 GMT, the FTSE 100 was up 0.1% at 7,688.78.
Richard Hunter, head of markets at Interactive Investor, said UK markets “made a positive but unconvincing move at the open, with one of the highlights coming from pleasing Smith & Nephew numbers”.
“Elsewhere within the premier index, mining stocks caught the attention of potential bargain hunters, with Endeavour Mining also edging ahead and casting some doubts on whether it will be relegated from the FTSE100 after all. The reshuffle will be announced after the close of business, but based on closing prices from today, which means that easyJet will need to wait in the wings to discover whether it has regained its position at the top table.”
He pointed out that US markets paused for breath on Monday after a strong run powered by a largely successful earnings season and renewed excitement over the potential of AI, which has driven the main indices to hover around record highs.
“At such elevated levels, expectations will tick up given more stretched valuations, while investors will continue to scrutinise the economic data which has so far defied estimates and lessened any pressure on the Federal Reserve to cut interest rates for the moment,” he said.
“The current consensus points to three cuts this year beginning in June, something of a far cry from the beginning of the year when six cuts were expected to commence in March.
“As such, and in the absence of any high level data, Thursday’s personal consumption expenditures report will take on additional significance, with a hotter than expected print likely to test the enthusiasm which investors have had so far this year. The reading will follow data from yesterday which saw new home sales for January coming in below estimates, in light of higher mortgage rates. Nonetheless, a rise of 1.5% was accompanied by an ongoing shortage of previously owned homes, while a positive manufacturing reading pointed to underlying economic resilience.”
On home shores, data released earlier showed that shop price inflation in the UK fell to its lowest level in 23 months in February.
According to the British Retail Consortium-NielsenIQ Shop Price Index, the annual rate of price growth slowed to 2.5% this month, down from 2.9% in January, as easing supply-chain pressures fed through to food prices.
This was below the three-month average rate of 3.3% and the lowest level since March 2022.
Non-food inflation was unchanged at 1.3% compared with last year, while food inflation eased to 5.0% from 6.1% – marking the tenth straight monthly deceleration.
However, according to BRC chief executive Helen Dickinson, “significant uncertainties remain” as geopolitical tensions increase.
“Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope,” said Dickinson.
Meanwhile, Dickinson highlighted that UK retailers are facing a big rise in business rates bills in April, which was “determined by last September’s sky-high inflation rate”.
“April’s rates rise should be based on April’s inflation, and the Chancellor should use the Spring Budget to make this correction, supporting business investment and helping to drive down prices for consumers,” Dickinson said.
In equity markets, Smith & Nephew rallied after it posted better-than-expected full-year trading profit of $970m and lifted its outlook for 2024. It now expects underlying revenue growth expected of between 5% and 6%, up from 4.6% to 5.6%.
Flutter Entertainment was in the black as Barclays upgraded its stance on the shares to ‘overweight’ from ‘equalweight’ and hiked the price target.
Endeavour Mining was up as it said that wet commissioning activities are now underway at the Sabodala-Massawa Expansion project in Senegal, with first gold expected in early May.
Fund manager Abrdn was the standout gainer on the FTSE 250 as it posted a narrowing of its full-year losses but warned of a hit to margins as clients shift to passive investing.
On the downside, speciality chemicals company Croda International slumped as it warned of lower operating margins after posting a drop in 2023 profits due to customers destocking and a weak macroeconomic environment.
Outside the FTSE 305, On The Beach surged after saying it had signed a long-term distribution agreement with Ryanair, despite the latter having recently branded the online travel agent a “pirate” and accused it of marking up prices.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smith & Nephew Plc | +3.02% | +34.00 | 1,159.50 |
| 2 |  |
Anglo American Plc | +2.57% | +44.40 | 1,771.00 |
| 3 |  |
Standard Chartered Plc | +1.63% | +10.40 | 646.80 |
| 4 |  |
Vodafone Group Plc | +1.60% | +1.06 | 67.14 |
| 5 |  |
Rio Tinto Plc | +1.38% | +70.00 | 5,137.00 |
| 6 |  |
Bhp Group Limited | +1.22% | +27.50 | 2,277.50 |
| 7 |  |
Hiscox Ltd | +1.08% | +12.00 | 1,122.00 |
| 8 |  |
Hsbc Holdings Plc | +0.94% | +5.60 | 601.30 |
| 9 |  |
Flutter Entertainment Plc | +0.93% | +155.00 | 16,850.00 |
| 10 |  |
Kingfisher Plc | +0.91% | +2.10 | 231.90 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Croda International Plc | -2.12% | -104.00 | 4,799.00 |
| 2 |  |
Hargreaves Lansdown Plc | -2.11% | -15.80 | 732.80 |
| 3 |  |
Unilever Plc | -1.61% | -64.50 | 3,931.50 |
| 4 |  |
Rolls-royce Holdings Plc | -1.61% | -5.80 | 355.40 |
| 5 |  |
Bunzl Plc | -1.18% | -38.00 | 3,172.00 |
| 6 |  |
Barratt Developments Plc | -1.07% | -5.10 | 472.20 |
| 7 |  |
Spirax-sarco Engineering Plc | -1.05% | -110.00 | 10,365.00 |
| 8 |  |
Direct Line Insurance Group Plc | -0.91% | -1.50 | 163.20 |
| 9 |  |
Taylor Wimpey Plc | -0.88% | -1.25 | 140.65 |
| 10 |  |
Informa Plc | -0.85% | -7.00 | 818.80 |
US close: Dow, S&P 500 pull back from peaks ahead of key data
US stocks finished with small losses on Monday, as early gains were quickly erased with the Dow Jones Industrial Average and S&P 500 both retreating from record highs ahead of a busy week for economic data.
The Dow fell 0.16% from the 39,131.53 all-time closing high reached last Friday, while the S&P 500 slipped 0.38% after hitting a new peak of 5,088.8. The Nasdaq, which continues to trade close to its highest-ever level, also slipped 0.13%.
Dragging on markets on Monday was a retreat by heavyweight tech stocks, which performed well over recent days following Nvidia’s barnstorming earnings report last week, with the chip maker lifting sentiment across the sector. Nvidia, which has jumped 17% over the past two days, finished broadly flat, but Amazon, Apple, Microsoft and Alphabet all finished in the red.
The macroeconomic calendar was relatively light, with new home sales being the only major publication. New home sales rose 1.5% in January, according to the Census Bureau, hitting a seasonally adjusted annualised rate of 661,000. While that fell short of market expectations for a reading of 680,000.
Ryan Sweet, chief US economist at Oxford Economics, said that the slight miss in sales shouldn’t be a concern since the weather likely dampened sales, particularly in the South. What’s more, January’s levels are above their average for the fourth quarter of 2023 and should provide a boost to the economy in the first quarter or 2024.
“The outlook for new-home sales remains cautiously optimistic as the 30-year fixed mortgage rate is off its recent peak, job growth is strong, and inventories are not problematic for the new-home market,” Sweet said.
In other stock movements, Domino’s Pizza was a high riser after hiking its dividend by 25% and upping its share buyback programme by $1bn. The pizza restaurant and delivery chain reported profits ahead of expectations and cited its “Emergency Pizza” promotion which helped increase active rewards programme members by 10%.
Aluminium giant Alcoa fell sharply as investors gave a negative reaction to its announced acquisition of Australian firm Alumina Limited for $2.2bn.
]Pharma group Moderna was also out of favour after analysts at HSBC cut the stock from ‘hold’ to ‘reduce.
Things are set to pick up on the macro front this week, with durable goods order, consumer confidence, GDP and manufacturing PMIs due, but the headline-grabbing release will be the all-important personal consumption expenditures (PCE) index on Thursday.
The year-on-year change in the PCE index, the Federal Reserve’s preferred gauge of inflation, is expected to show that price growth eased to 2.4% in January from 2.6%, with the core annual rate tipped to slow to 2.8% from 2.9%.
Tuesday newspaper round-up: Post Office, The Telegraph, Homebase
A top US antitrust watchdog sued to block the country’s largest-ever supermarket merger on Monday, alleging the deal would raise prices for millions of shoppers. The Federal Trade Commission argued that Kroger’s $24.6bn takeover of rival grocer Albertsons would narrow consumer choice and weaken the quality of products on shelves. – Guardian
Newly published documents show that a “toxic culture of disbelief” persists at the top of the Post Office when it comes to wronged post office operators, MPs have been told. Post Office board members complained of being “tired and constantly distracted by historical issues, short-term crisis management and funding issues”, minutes of one of their meetings last year show. – Guardian
Rishi Sunak’s raid on workers and businesses will cost the country an extra £100bn in taxes by the end of this decade just as surging net migration piles more pressure on public services, the Institute of Fiscal Studies (IFS) has warned. The respected think tank said Britain’s tax burden would jump by 2030 as frozen tax thresholds mean inflation pushes more people into higher brackets and corporation tax weighs on businesses. – Telegraph
The UAE-funded takeover of The Telegraph could be blocked under proposed laws that would grant Parliament a veto on foreign state ownership of the British news media. An amendment that would require approval from both the House of Commons and the House of Lords for such deals has been tabled to the Digital Markets, Competition and Consumers Bill. – Telegraph
Homebase could soon be sold to new owners after talks were held with a number of potential buyers. Hilco Capital, which bought the troubled DIY and garden chain for £1 in 2018, is believed to have held discussions with a number of parties, including The Range and B&M European Value Retail, the discount retailers. – The Times
