ADVFN Morning London Market Report: Wednesday 14 September 2022

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London open: Stocks fall as investors mull inflation data

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London stocks fell in early trade on Wednesday, taking their cue from a weak session on Wall Street after a hotter-than-expected inflation print, as the latest reading on UK inflation showed an unexpected dip in August.

At 0825 BST, the FTSE 100 was down 0.6% at 7,342.71.

Data out earlier from the Office for National Statistics showed that inflation eased in August but remained close to a 40-year high.

Consumer price inflation slowed to 9.9% from 10.1% in July, coming in below consensus expectations for an increase to 10.2%. Most of the decline was down to a drop in fuel inflation to 32.1% form 43.7%.

“A fall in the price of motor fuels made the largest downward contribution to the change in both the CPIH and CPI annual inflation rates between July and August 2022,” the ONS said. “Rising food prices made the largest, partially offsetting, upward contribution to the change in the rates.”

The figures also showed that food price inflation rose to 13.4% in August from 12.8% the month before, while clothing price inflation edged up to 7.9% from 6.9% to 7.9%.

Core inflation – which strips out food, alcohol and tobacco and energy – ticked up to 6.3% on the year, from 6.2%.

Paul Dales, chief UK economist at Capital Economics, said the easing in CPI inflation “is a bit of a relief after yesterday’s US CPI shocker, but overall and core UK CPI inflation haven’t peaked yet”. As such, he reckons the Bank of England “will have to continue turning the screws”.

Dales added: “Overall, we think CPI inflation will peak around 11.0% just before the end of the year and that core inflation will continue to edge higher too. That means the Bank will have to continue raising interest rates, from 1.75% now to 3.00% if not higher.”

In equity markets, Abrdn was the worst performer on the FTSE 100 after a downgrade to ‘sell’ at Deutsche Bank.

Budget airline easyJet flew lower after a downgrade to ‘sell’ at Stifel.

C&C Group was also under the cosh after the Bulmers maker said it expects to deliver a 35% jump in first-half net revenues but that it has seen a slowdown in on-trade momentum over the second quarter.

On the upside, Croda was sitting pretty at the top of the FTSE 100 after an upgrade to ‘buy’ at Jefferies.

Homeware retailer Dunelm surged to the top of the FTSE 250 as it reported record full-year results in a “challenging” environment.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Next Plc +1.37% +80.00 5,908.00
2 Croda International Plc +0.91% +62.00 6,882.00
3 Tui Ag +0.67% +0.90 134.30
4 Burberry Group Plc +0.59% +10.50 1,783.50
5 Scottish Mortgage Investment Trust Plc +0.52% +4.20 811.60
6 Flutter Entertainment Plc +0.38% +40.00 10,535.00
7 Marks And Spencer Group Plc +0.37% +0.45 122.35
8 Carnival Plc +0.36% +2.80 775.20
9 Barratt Developments Plc +0.34% +1.40 418.60
10 Standard Chartered Plc +0.29% +1.80 614.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Severn Trent Plc -3.48% -97.00 2,689.00
2 Ocado Group Plc -3.47% -23.60 655.60
3 United Utilities Group Plc -3.36% -36.00 1,035.50
4 Easyjet Plc -3.22% -11.40 342.30
5 Rolls-royce Holdings Plc -2.99% -2.34 75.93
6 Melrose Industries Plc -2.59% -3.15 118.45
7 Anglo American Plc -2.57% -75.00 2,845.50
8 National Grid Plc -2.41% -26.00 1,054.00
9 Schroders Plc -1.96% -52.00 2,602.00
10 Bae Systems Plc -1.94% -15.40 778.60

 

US close: Dow loses almost 1,300 points after hot CPI reading

Wall Street stocks tumbled to the close in their worst session in more than two years on Tuesday, after August’s CPI reading came in hotter than expected.

At the close, the Dow Jones Industrial Average was down 3.94% at 31,104.97, as the S&P 500 lost 4.32% to 3,932.69, and the Nasdaq Composite was off 5.16% at 11,633.57.

The Dow closed 1,276.37 points lower on Tuesday, more than erasing the gains it recorded on Monday.

“Today’s above-expectations CPI figure has dashed hopes of a more dovish Fed, and seems to have brought the rally of the past few sessions to an end,” said IG chief market analyst Chris Beauchamp.

“Dip-buying momentum had been gathering pace, but with prices back on an upward trajectory the mood has turned decidedly sour.

“A 75 basis point hike is back on the cards as the most likely outcome at the next FOMC get-together, and as a result the market is back to selling equities and buying the dollar.”

Tuesday’s primary focus was news that US consumer price inflation slowed in August but was still above expectations, according to the Labor Department, fuelling expectations of another big rate hike from the Federal Reserve.

Inflation eased to 8.3% on the year, from 8.5% in July, but came in above expectations of 8.1%.

On a monthly basis, consumer price inflation rose 0.1%, compared to a flat reading in July.

Core inflation, meanwhile, which strips out food and energy, increased to 6.3% in August from 5.9% a month earlier.

Elsewhere, talk of a railroad strike was also drawing investor attention, with fears that any walkout could put further pressure on already-strained supply chains.

A strike was said to potentially cost the economy roughly $2bn every day, disrupt the retail industry, and weigh on retail giants and logistics companies’ profit expectations.

Elsewhere on the macro front, the National Federation of Independent Business‘ small business optimism index increased for a second month In August, rising to 91.8 from 89.9 in July, with falling energy prices offering some relief.

The percentage of business owners anticipating improved business conditions over the next six months increased 10 points to -42%.

In equities, the technology behemoths were among the leading losers, with Google parent Alphabet off 5.9%, Amazon down 7.06%, Apple losing 5.87%, Microsoft sliding 5.5%, and Tesla 4.04% weaker.

Peloton Interactive tumbled 10.32% after confirming the resignations of co-founders John Foley and Hisao Kushi overnight on Monday.

Positive moves were extremely thin on the ground, with fertiliser-focussed materials among the only bright spots, as Corteva added 0.87% and Mosaic gained 0.32%.

 

Wednesday newspaper round-up: Deloitte, fracking, Twitter

US freight railroad workers are close to striking over claims that grueling schedules and poor working conditions have been driving employees out of the industry over the past several years. Heated negotiations over a new union contract between railroad corporations and 150,000-member-strong labor unions have been ongoing for nearly three years. A “cooling off” period imposed by the Biden administration after it issued recommendations to settle the dispute ends on Friday. If no deal is reached, unions are threatening industrial action – the first since 1992 – and workers say they will quit an industry already facing staff shortages. – Guardian

The Worcester owners have confirmed they have reached an agreement for the sale of the club in a move that looks set to save the Warriors from financial disaster if it proves successful. As reported by the Guardian on Monday, a deal has been agreed with an unidentified buyer, giving rise to optimism that Worcester’s burgeoning debts of £25m – including the £6m owed to HMRC by 6 October – will betaken on and the club can avoid going into administration, which would in turn lead to relegation. – Guardian

Deloitte is creating at least 1,000 new jobs outside of London as it joins a rush of City firms expanding beyond the capital. The Big Four firm will add the new roles in Northern Ireland, Scotland, Wales and the north of England over the next five years in a boost for the country’s regional economies. – Telegraph

Liz Truss is being urged to relax the limits on earthquakes caused by fracking as part of plans to kickstart an energy revolution. The Prime Minister is already poised to end the moratorium on fracking within days in a bid to make Britain energy independent by 2040. But companies say this alone will not be enough to unlock Britain’s potentially vast shale gas reserves. The Telegraph understands fracking businesses are lobbying for the limits on seismic activity to be substantially increased to help kickstart the industry. – Telegraph

The FBI informed Twitter of at least one Chinese agent working at the company, US senator Chuck Grassley told a Senate hearing yesterday where a whistleblower testified, raising new concerns about foreign meddling at the influential social media platform. Peiter “Mudge” Zatko, a former hacker who served as Twitter’s head of security until he was fired last year, said some Twitter employees were concerned that the Chinese government would be able to collect data on the company’s users. – The Times

Drew Nelson, the former owner of Newport Wafer Fab, is reportedly close to a deal with a private equity firm to buy back Britain’s biggest semiconductor manufacturer, if the government decides to unwind its purchase by the Chinese-owned business Nexperia. The investor, Palladian Investment Partners, also considered teaming up with Nelson to rescue the business last year but this was rejected by Nexperia, a key customer, shareholder and board member, because it said the terms were too punitive. – The Times

 

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