ADVFN Morning London Market Report: Wednesday 22 June 2022

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London open: London open: Stocks slump as inflation hits fresh 40-year high

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London stocks slumped in early trade on Wednesday after data showed that UK inflation hit a fresh 40-year high in May as energy and food prices continued to surge.

At 0835 BST, the FTSE 100 was 1.5% lower at 7,046.14, while sterling was down 0.8% against the dollar at 1.2176.

According to figures released earlier by the Office for National Statistics, consumer price inflation ticked up to 9.1% from 9% in April. This marked the highest level since March 1982 and was in line with analysts’ estimates.

ONS chief economist Grant Fitzner said: “Though still at historically high levels, the annual inflation rate was little changed in May.

“Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year and a drop in often fluctuating computer games prices.

“The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record.”

On a monthly basis, consumer price inflation increased 0.7% in May, compared with a rise of 0.6% in May 2021.

After lifting interest rates to a 13-year high of 1.25% last week, the Bank of England warned that inflation could hit 11% this autumn. This was up from a previous forecast of 10%.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The latest temperature check of the UK economy shows the mercury rising again, with no end yet in sight to feverish price rises.

“May’s rise in inflation was smaller compared to the jump we saw in April, so although the pace of rate rises looks set to continue, the Bank may hold off from bringing in a larger hike of 0.5% for the time being. The pound has slipped back against the dollar, down to $1.22 compared to $1.23 earlier yesterday and worries are mounting that this could flame inflation further by making imported goods even more expensive.”

In equity markets, miners were on the back foot as copper prices fell, with GlencoreAnglo American and Antofagasta all lower.

Retailer JD Sports Fashion fell after it said annual profits more than doubled but struck a more cautious note on the outlook, while software company Micro Focus tumbled after its interim results.

Housebuilder Berkeley Group lost ground even as it posted a jump in full-year profits and said underlying reservations were slightly ahead of pre-pandemic levels.

On the upside, NatWest was the top gainer on the FTSE after an upgrade to ‘buy’ at Jefferies. It was also in focus after the UK government said it was extending a plan to sell more of its £11.3bn stake in the bank for another year.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Admiral Group Plc +1.09% +23.00 2,126.00
2 Centrica Plc +1.03% +0.82 80.70
3 Unilever Plc +0.56% +20.00 3,623.50
4 Direct Line Insurance Group Plc +0.49% +1.20 245.70
5 Astrazeneca Plc +0.43% +44.00 10,172.00
6 Gsk Plc +0.35% +6.00 1,697.60
7 Sainsbury (j) Plc +0.29% +0.60 205.70
8 Barclays Plc +0.20% +0.32 160.74
9 Lloyds Banking Group Plc +0.10% +0.05 43.49
10 Sse Plc +0.03% +0.50 1,609.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Micro Focus International Plc -18.38% -65.70 291.80
2 Berkeley Group Holdings (the) Plc -5.14% -195.00 3,597.00
3 Ocado Group Plc -5.07% -43.40 812.20
4 Glencore Plc -5.06% -24.40 458.20
5 Carnival Plc -4.82% -34.00 671.20
6 Shell Plc -4.23% -91.00 2,060.00
7 Prudential Plc -4.16% -40.60 935.40
8 Antofagasta Plc -3.87% -51.50 1,278.00
9 Johnson Matthey Plc -3.59% -73.50 1,972.50
10 Rolls-royce Holdings Plc -3.56% -3.23 87.60

 

US close: Dow Jones ends session more than 600 points higher

Wall Street stocks closed sharply higher on Tuesday as traders returned from the Juneteenth federal holiday in a more positive mood despite ongoing recessionary fears.

At the close, the Dow Jones Industrial Average was up 2.15% at 30,530.25, while the S&P 500 was 2.45% firmer at 3,764.79, and the Nasdaq Composite saw out the session 2.51% stronger at 11,069.30.

The Dow closed 641.47 points higher on Tuesday, easily reversing losses recorded on Friday as fears of a potential economic slowdown weighed on sentiment.

Energy prices were in focus on Tuesday, with Brent crude futures trading 0.43% higher at $114.62 per barrel and West Texas Intermediate futures gaining 0.99% to $110.65 a barrel.

Cryptocurrencies also continued to draw an amount of investor attention, with Bitcoin falling to a new low for the year of $17,601.58 over the weekend before clawing its way back to over $20,900 on Tuesday.

The yield on the benchmark 10-year Treasury note moved almost seven basis points higher to sit at 3.304%.

On the macro front, the Chicago Fed‘s national activity index fell to an eight-month low of 0.01 in May, down from 0.40 in April, as production-related indicators and the personal consumption and housing categories weighed on the index.

Elsewhere, existing home sales declined 3.4% to a seasonally adjusted annual rate of 5.41m in May, according to the National Association of Realtors, the lowest since June 2020 as sales fell for a fourth straight month amid rising mortgage rates and decades-high inflation.

The Federal Reserve will also be in focus throughout the week, with chairman Jerome Powell beginning his Congressional testimony on Wednesday.

In the corporate space, Tesla chief executive Elon Musk confirmed the electric carmaker would be cutting its salaried workforce by 10% over the next three months but stated that hourly staff numbers were still expected to grow, while foods giant Kellogg revealed it will split into three public companies by spinning off its North American cereal and plant-based divisions

 

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