ADVFN Morning London Market Report: Wednesday 14 December 2022

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London open: Stocks edge down after UK inflation, ahead of US rate decision


London stocks edged down in early trade on Wednesday as investors mulled data showing that inflation cooled a little in November, and looked to the latest rate decision from the US Federal Reserve.

At 0820 GMT, the FTSE 100 was 0.2% lower at 7,486.87, while sterling was flat against the dollar at 1.2365.

Figures released earlier by the Office for National Statistics showed that consumer price inflation eased to 10.7% in the 12 months to November from a 41-year high of 11.1% in October, as transport costs fell back. Analysts had been expecting 10.9%.

The largest downward contribution came from transport, after the price of motor fuels and second-hand cars eased, alongside declines in tobacco, clothing and footwear, and games, toys and hobbies. That was partially offset, however, by prices hikes for alcohol in restaurants, cafes and pubs.

The Bank of England has previously stated that it expects inflation to peak at the end of 2022 before falling steadily throughout 2023. Interest rates now stand at 3.0% after a series of hikes throughout the year, and most economists expect another rise when the Monetary Policy Committee meets on Thursday.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Inflation may be past the peak but given that prices for UK consumers have scaled a mountain, there is still a vertiginous descent to navigate before it’s back down to less dangerous levels.

“Lower fuel and second-hand car prices have helped bring down the headline CPI rate but price pain continues in many parts of the economy with increases in alcohol costs in pubs, cafes and restaurants particularly onerous.

“The Bank of England is still expected to raise rates by 0.5% tomorrow, increasing borrowing costs yet again for households and businesses, to try and shove away demand and push prices down. The dark clouds hovering as a recession rolls in are likely to hasten the path lower, but policymakers will still want to tread carefully, fearful that the economy could be shoved into a deep crevasse of contraction if rate rises are too steep.

“It’s likely that the next moves by the Bank of England will be more moderate 0.25% hikes with an expectation of reaching 4.75% by the middle of 2023.”

Looking ahead to the rest of the day, the US rate announcement is due after the close of European markets, at 1900 GMT, amid expectations of a 50-basis points hike.

In equity markets, holiday giant TUI slumped even as it reported a return to annual profits and said it expected underlying earnings to increase significantly in 2023, despite market uncertainty.

Watches of Switzerland was also under the cosh even as it backed its full-year guidance and reported a rise in first-half profit and revenue amid solid demand.

Housebuilders Taylor Wimpey and Redrow were both knocked lower by rating downgrades at JPMorgan Cazenove.

On the upside, Volution rallied after it said group revenue for the four months to 30 November rose 7% thanks to a combination of volume and price increases, with all three geographic regions growing organically.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Bt Group Plc +3.86% +4.40 118.30
2 Fresnillo Plc +2.17% +18.60 873.80
3 Johnson Matthey Plc +1.05% +22.00 2,114.00
4 Direct Line Insurance Group Plc +0.75% +1.60 214.30
5 Centrica Plc +0.55% +0.50 91.02
6 Bae Systems Plc +0.49% +4.00 825.00
7 Bp Plc +0.41% +1.95 473.00
8 British Land Company Plc +0.40% +1.60 396.90
9 Melrose Industries Plc +0.38% +0.50 131.15
10 Micro Focus International Plc +0.34% +1.80 523.60


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Tui Ag -8.03% -11.85 135.80
2 International Consolidated Airlines Group S.a. -3.00% -4.06 131.18
3 Ocado Group Plc -2.77% -19.40 680.60
4 Flutter Entertainment Plc -2.40% -290.00 11,800.00
5 Carnival Plc -2.13% -13.80 632.60
6 Easyjet Plc -1.81% -6.70 363.10
7 Auto Trader Group Plc -1.76% -10.00 559.40
8 Halma Plc -1.69% -37.00 2,149.00
9 Hikma Pharmaceuticals Plc -1.66% -25.50 1,508.50
10 Ashtead Group Plc -1.46% -74.00 4,982.00


US close: Stocks higher after CPI slips in November

Wall Street stocks closed higher on Tuesday as November’s all-important inflation report seemed to indicate that inflation may be peaking.

At the close, the Dow Jones Industrial Average was up 0.30% at 34,108.64, while the S&P 500 advanced 0.73% to 4,019.65 and the Nasdaq Composite saw out the session 1.01% stronger at 11,256.81.

The Dow closed 103.60 points higher on Tuesday, extending solid gains recorded in the previous session.

Tuesday’s main focus was news that the cost of living in the US slowed a bit more quickly than anticipated in November, as energy and used vehicle prices continued to retreat. According to the Department of Labor, the year-on-year rate of increase in the headline consumer price index slipped to 7.1%, while at the core level, the annual rate of increase slipped to 6.0%.

Elsewhere on the macro front, the National Federation of Independent Business‘ small business optimism index unexpectedly increased to 91.9 in November amid a slight ease in inflation pressures and better business conditions. The reading was up from 91.3 in October and also beat forecasts for a print of 90.4.

Also drawing an amount of investor attention, the Federal Reserve’s two-day policy meeting kicked off on Tuesday and will wrap up on Wednesday after the central bank reaches its next rate-hiking decision. Traders expect to see a 50 basis point increase, down from the last few increases of 75 basis points.

In the corporate space, United Airlines announced that it will purchase at least 100 Boeing Dreamliners in an effort to replace its ageing fleet of wide-body aircraft.


Wednesday newspaper round-up: Rail strikes, Binance, Asos

The price of a fresh turkey centrepiece for Christmas dinner has increased by as much as 45% because of shortages caused by the bird flu outbreak, which has wiped out 1.6 million of the birds in the UK. Not only are prices up but the choice of fresh turkey is more limited in the major supermarkets, with the number of whole bird and crown options falling by about a third this year. – Guardian

Passengers around Britain are set for another day of disrupted trains and curtailed services on the railway as a 48-hour RMT strike continues on Wednesday. The two-day strike, the first in a wave of industrial action that will affect the railway for four weeks around Christmas, involves about 40,000 members of the RMT union in Network Rail and at 14 train operators. – Guardian

New natural gas-only boilers are facing a ban within four years under net zero proposals for the grid to use hydrogen instead. All boilers installed after 2026 would have to be hydrogen-ready under the plan, which the Government announced in a consultation on Tuesday. – Telegraph

Binance has registered $1.9 billion of withdrawals in the past 24 hours, according to the blockchain data firm Nansen, as the world’s biggest crypto exchange said it had “temporarily paused” withdrawals of the USDC stablecoin. How crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits is under close scrutiny from users and regulators. The FTX founder Sam Bankman-Fried was charged by the US Securities and Exchange Commission yesterday with defrauding investors. – The Times

The squeeze from rising inventory levels has been sorely felt at Asos, the fast-fashion retailer whose shareholders include Mike Ashley’s Frasers Group. The owner of the Topshop and Miss Selfridge brands has moved to overhaul its operations after posting a full-year loss in October. Asos, which is scaling back discounts, plans to write off between £100 million and £130 million of out-of-fashion inventory to help refresh its brand for twentysomethings. Inventories rose to almost £1.1 billion at the end of August, its year end, from £807 million. – The Times


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