ADVFN Morning London Market Report: Wednesday 17 August 2022

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London open: Stocks little changed as inflation hits 10.1%

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London stocks were little changed in early trade on Wednesday as investors mulled the latest UK inflation data.

At 0825 BST, the FTSE 100 was up just 0.1% at 7,542.97, while sterling was 0.1% lower against the dollar at 1.2090.

Figures released earlier by the Office for National Statistics showed that inflation hit a fresh 40-year high in July and surpassed analysts’ expectations as food and energy prices jumped.

Consumer price inflation rose to 10.1% from 9.4% in June. This marked the highest rate since February 1982 and was above analysts’ expectations of 9.8%. Core inflation, which strips out food and energy costs, increased to 6.2% from 5.8% a month earlier, coming in above forecasts of 5.9%.

Food inflation rose in July to 12.6% – its highest rate since August 2008 – from 9.8%.

ONS chief economist Grant Fitzner said: “A wide range of price rises drove inflation up again this month. Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices.

“Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants also pushed up inflation in July.

“Driven by higher demand, the price for package holidays rose, after falling at the same time last year while air fares also increased.

“The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively.”

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘”The relentless rise upwards in prices continues, with little sign of a break for consumers who are desperately trying to make ends meet. Inflation has now hit double digits, a painful financial milestone but the worst is yet to come.

“=”Right now the Bank of England finds itself in a sticky situation, with little option but to keep raising interest rates to try and lower demand in the economy. Policymakers are in a jam because they know full well that this monetary policy squeeze risks pushing the UK economy into recession, if it isn’t there already. This boiling temperature will mean policymakers won’t easily be able to turn down the heat on those rate rises given their stated determination to put a lid on inflation and bring it back to its 2% target.”

In equity markets, banks were among the top performers, with BarclaysLloyds and NatWest all trading up.

Construction firm Balfour Beatty gained as it upgraded full-year guidance after interim profits more than doubled and new orders rose 10%.

On the downside, Ladbrokes owner Entain slumped after it was fined £17m by the Gambling Commission for social responsibility and anti-money laundering failures.

Housebuilder Persimmon ticked lower as it posted a fall in interim profits, but reiterated completion guidance and said price rises were offsetting cost inflation.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Carnival Plc +5.41% +42.20 822.00
2 Hiscox Ltd +1.92% +17.60 932.00
3 Fresnillo Plc +1.58% +11.40 734.20
4 Admiral Group Plc +1.27% +29.00 2,317.00
5 Ferguson Plc +1.25% +130.00 10,510.00
6 Glencore Plc +1.08% +5.20 488.10
7 3i Group Plc +1.04% +13.00 1,266.50
8 British American Tobacco Plc +1.00% +34.00 3,440.50
9 Coca-cola Hbc Ag +0.93% +19.00 2,057.00
10 Burberry Group Plc +0.83% +15.00 1,821.50

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Johnson Matthey Plc -2.59% -59.00 2,221.00
2 Tui Ag -2.26% -3.50 151.25
3 Antofagasta Plc -2.19% -25.50 1,139.00
4 Rolls-royce Holdings Plc -2.00% -1.72 84.18
5 Gsk Plc -1.85% -26.40 1,398.60
6 Hikma Pharmaceuticals Plc -1.74% -27.00 1,523.00
7 Melrose Industries Plc -1.70% -2.60 150.65
8 Smith (ds) Plc -1.53% -4.50 289.30
9 Persimmon Plc -1.51% -28.00 1,821.00
10 Ocado Group Plc -1.50% -14.00 917.80

 

US close: Retailers help keep Dow above water

Wall Street’s main market gauges closed in a mixed state on Tuesday after a weak reading for US housing starts, although better-than-expected quarterly reports out of retail giants Walmart and Home Depot kept the Dow in the green.

At the close, the Dow Jones Industrial Average was up 0.71% at 34,152.01 and the S&P 500 added 0.19% to 4,305.20, while the Nasdaq Composite was off 0.19% at 13,102.55.

“Markets were bracing themselves following not one, but two profit warnings from US retail giant Walmart,” said AJ Bell financial analyst Danni Hewson.

“But some smart discounting won over cash-strapped consumers and, with gas prices also falling, the grocer beat expectations and pulled competitors up with it.

“It helped that Home Depot delivered some similar good news at the start of a retail results week investors had been girding their loins for”

In economic news, the Department of Commerce reported that in seasonally-adjusted terms, the annualised rate of housing starts in July fell at a month-on-month pace of 9.6% to reach 1.446m (consensus: 1.54m).

Ian Shepherdson, chief economist at Pantheon Macroeconomics, labelled the starts data “horrible”, explaining that it was the fifth consecutive monthly drop, the largest of the sequence, and that the annualised rate of starts had fallen below 1.0m for the first time since June 2020.

On the other hand, US industrial production rose a bit more quickly than expected last month.

The Commerce Department said that total industrial output grew at a month-on-month pace of 0.6% in July (consensus: 0.3%).

In equities, big-box retail giant Walmart jumped 5.11% after posting better-than-expected sales and earnings for the three months to June, and revising its guidance for sales growth in 2023 a tad higher.

Home Depot shares were also on the up, gaining 4.06% after the DIY retailer beat analyst estimates for its second quarter.

 

Wednesday newspaper round-up: Tideway, cyclists, corporate insolvencies

The executive overseeing construction of London’s “super sewer” under the Thames has been awarded bonuses that doubled his pay to nearly £1m despite delays and cost over-runs on the flagship project. With executive pay in the water industry already under scrutiny, Tideway has revealed it paid its chief executive, Andy Mitchell, a total package of £928,000 for the year to 31 March 2022, up 7.5% from £863,000 a year earlier. – Guardian

Bikes could be made to have registration plates and insurance as ministers weigh up bringing speed limits for cyclists into line with those for drivers. The government is also considering the possibility of cyclists receiving licence penalty points and fines if they break speed limits or run red lights, the Daily Mail reported. – Guardian

Germany plans to keep its remaining nuclear power plants open for longer in a major U-turn as it scrambles to keep the lights on this winter with less Russian gas. Officials have concluded the plants are needed due to gas shortages and they can be kept open without safety concerns, the Wall Street Journal reported. – Telegraph

The world’s biggest airline has announced a deal to buy a fleet of new high-tech jets dubbed the “son of Concorde”, setting up the return of supersonic transatlantic flights by the end of the decade. American Airlines on Tuesday agreed to purchase up to 20 Overture aircraft from Boom Supersonic, with an option to extend the order to 40. – Telegraph

Corporate insolvencies rose by 7.5 per cent last month compared with June and were 27 per cent higher than they were three years ago, before the pandemic struck. The Insolvency Service said yesterday that there had been 1,827 company insolvencies in England and Wales last month, 67 per cent higher than a year ago. – The Times

 

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