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London open: Stocks rally as inflation eases more than expected
London stocks rallied in early trade on Wednesday after data showed that UK inflation slowed more than expected in November, boosting rate cut hopes for next year.
At 0840 GMT, the FTSE 100 was up 1.3% at 7,733.67, comfortably outperforming its European counterparts.
Figures released by the Office for National Statistics showed that consumer price inflation slowed to 3.9% from 4.6% in October. This marked the lowest reading since September 2021 and was below analysts’ expectations of 4.4%.
The ONS said the largest downward contributions came from transport, recreation and culture, and food and non-alcoholic beverages.
Core inflation – which strips out volatile food and energy prices – fell to 5.1% in November from 5.7% the month before. Economists were expecting it to ease to 5.6%.
ONS chief economist Grant Fitzner said: “Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine.
“The biggest driver for this month’s fall was a decrease in fuel prices after an increase at the same time last year.
“Food prices also pulled down inflation, as they rose much more slowly than this time last year.
“There was also a price drop for a range of household goods and the cost of second-hand cars.”
ING economist James Smith said markets are now pricing a whopping 140 basis points of rate cuts next year.
“That’s maybe pushing it, but investors are right to be thinking about several cuts next year, despite the Bank of England’s recent pushback,” he said.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “November’s surprisingly sharp fall in CPI inflation reinforces the likelihood that the MPC will begin to reduce Bank Rate in the first half of 2024, far earlier than it has been prepared to signal so far.”
Corporate news was scarce as we head towards the Christmas break, but Intertek jumped after a double upgrade to ‘outperform’ at Exane, which said consensus is now overly bearish on the testing and inspection company’s margin outlook.
Elsewhere, Petrofac surged 45% after it saying it has secured a second contract award under the six-project, $14bn multi-year framework agreement with Tennet, with its portion valued at around $1.4bn.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Intertek Group Plc | +2.73% | +112.00 | 4,211.00 |
| 2 |  |
Flutter Entertainment Plc | +2.37% | +330.00 | 14,250.00 |
| 3 |  |
Vodafone Group Plc | +2.08% | +1.39 | 68.24 |
| 4 |  |
Ocado Group Plc | +1.90% | +14.60 | 781.40 |
| 5 |  |
Bt Group Plc | +1.74% | +2.15 | 125.70 |
| 6 |  |
Barclays Plc | +1.69% | +2.50 | 150.16 |
| 7 |  |
Hargreaves Lansdown Plc | +1.53% | +11.00 | 731.60 |
| 8 |  |
Segro Plc | +1.48% | +13.00 | 892.40 |
| 9 |  |
Shell Plc | +1.47% | +37.50 | 2,580.00 |
| 10 |  |
Legal & General Group Plc | +1.38% | +3.40 | 249.10 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smith (ds) Plc | -2.73% | -8.50 | 302.50 |
| 2 |  |
Smurfit Kappa Group Plc | -0.57% | -18.00 | 3,154.00 |
| 3 |  |
Centrica Plc | -0.46% | -0.65 | 140.70 |
| 4 |  |
Experian Plc | -0.44% | -14.00 | 3,189.00 |
| 5 |  |
Bhp Group Limited | -0.34% | -9.00 | 2,633.00 |
| 6 |  |
Rightmove Plc | -0.32% | -1.80 | 563.20 |
| 7 |  |
Burberry Group Plc | -0.24% | -3.50 | 1,480.00 |
| 8 |  |
Rolls-royce Holdings Plc | -0.20% | -0.60 | 294.40 |
| 9 |  |
Mondi Plc | -0.13% | -2.00 | 1,526.50 |
| 10 |  |
St. James’s Place Plc | -0.12% | -0.80 | 673.00 |
US close: Dow hits new peak, S&P 500 nears record high as rally continues
The Dow Jones rose to another all-time high on Tuesday, while the S&P 500 neared record territory, as rate-cut hopes continued to fuel an end-of-year rally on Wall Street.
The Dow finished 0.68% higher at a new high of 37,557.92, its fifth straight record close in a row; the Nasdaq gained 0.66% to 15,003.22; while the S&P 500 rose 0.59% to 4,768.37, just 31 points off its 4,796.56 peak reached in January 2022.
The S&P 500 has now gained 2.6% since last Wednesday’s Federal Open Market Committee (FOMC) meeting in which the so-called dotplot graph showed policymakers were projecting rate cuts of 0.75 percentage points throughout 2024.
However, central bankers are continuing to deliver mixed messages to the market. New York Fed president John Williams and Atlanta Fed head Raphael Bostic have both come out since last week’s FOMC meeting to say that it is too soon to talk about rate cuts, while San Francisco Fed president Mary Daly said her own expectations for rates were “very close” to the dotplot graph released last week, which signalled three rate cuts in 2024.
On Tuesday, the head of the Richmond Fed, Thomas Barkin, said in an interview with Yahoo Finance that the central bank was making “good progress” on its fight against inflation, and that recent “data has come in pretty nicely”. He cautioned from using the Fed’s recent projections for interest rates as solid guidance, but said: “If you’re going to assume that inflation comes down nicely, then of course we’d respond appropriately.”
Nevertheless, inflationary pressures were back on investors’ minds as oil prices continued to climb on Tuesday, with WTI crude up 1.5% at $73.58 a barrel, as shipping disruptions in the Red Sea sparked supply fears. Several shipping companies and oil giant BP have paused shipments through the key trading route as a result of a series of attacks by Yemen’s Houthi rebels who are demanding a full ceasefire in Gaza.
“While in the short term, any price shock is likely to be temporary, if the situation becomes a more permanent state of affairs, or escalates, we could see prices continue to move higher,” said Michael Hewson, analyst at CMC Markets.
Boeing bags Lufthansa orders
Boeing shares were higher on the back on an order for 40 737-8 MAX planes from Germany carrier Deutsche Lufthansa. The deal also includes purchasing options for a further 60 planes from Boeing.
Pharma stocks were performing well after a series of broker upgrades: Rhythm Pharma surged after Morgan Stanley raised its rating to ‘overweight’; Arvinas was lifted by an upgrade by Wells Fargo to ‘overweight’; while Amgen gained after BMO Capital Markets upped its recommendation to ‘outperform’.
Google parent company Alphabet also finished in positive territory despite the news it will pay $700m and make allowances for greater competition in its Play app store, according to the terms of its recent antitrust settlement.
Wednesday newspaper round-up: Avanti West Coast, British exporters, SoftBank
Northern political and transport leaders have called on the UK government to urgently review Avanti West Coast’s operations amid a renewed surge in intercity rail cancellations and delays. The intervention came as it emerged that morale at the train operating company has plummeted to the point where only 3% of staff say they feel valued, according to an internal Avanti survey seen by the Guardian. – Guardian
Almost two-thirds of British exporters have said selling to the EU has become harder in the past year, according to the British Chambers of Commerce, which is calling on the government to do more to smooth trade frictions post-Brexit. Three years on from Boris Johnson signing the Trade and Cooperation Agreement (TCA) with the EU, the small businesses which make up much of the BCC’s membership are still struggling to negotiate trade barriers. – Guardian
The chief executive and owner of Arm met Jeremy Hunt in Downing Street on Tuesday as regulators unveiled reforms that could encourage the semiconductor giant to pursue a secondary listing in London. Rene Haas, the chief executive of the Cambridge microchip designer, and Masayoshi Son, the head of its majority shareholder SoftBank, were seen leaving Number 11 on Tuesday morning. – Telegraph
Journalists at the Financial Times are demanding a minimum starting salary of $80,000 (£63,000) in a dispute over pay. The newspaper’s American union is locked in discussions with bosses amid concerns that current wages are not “anywhere close” to livable. Under current plans, the FT’s US-based staff have been offered a minimum wage of $60,000. – Telegraph
Pressure is mounting on the deputy prime minister to intervene on national security grounds in the Abu Dhabi-backed bid to buy the Telegraph newspapers. Conservative MPs have demanded that Oliver Dowden use the National Security and Investment Act to investigate the United Arab Emirates’ takeover. However, it is understood that the Cabinet Office is not expected to issue a call-in notice on the acquisition imminently, despite an American intervention in a UAE purchase of Fortress Investment Group, of the United States. – The Times
