LONDON MARKET CLOSE: Markets buoyed by US inflation reading

(Alliance News) - Stocks in London closed higher on Tuesday as a cooler than expected US inflation reading boosted investor sentiment.

The FTSE 100 index closed up 0.8%, or 56.92 points at 7,502.89. The FTSE 250 ended up 1.4%, or 266.85 points, at 19,086.29, and the AIM All-Share closed up 1.0%, or 8.01 points, at 838.59.

The Cboe UK 100 ended up 0.7% at 749.97, the Cboe UK 250 closed up 1.2% at 16,467.76, and the Cboe Small Companies ended up 0.7% at 13,247.13.

Stocks in London reacted positively to the US CPI reading, which came out at 1330 GMT. The FTSE 100, FTSE 250 and AIM All-Share all jumped shortly after the reading.

Data from the Bureau of Labor Statistics showed consumer price rises in the US slowed by more than expected in November.

Annually, the consumer price index rose 7.1% in November from a year before, slowing from the 7.7% annual rise recorded in October.

Market consensus, according to FXStreet, had predicted inflation would be 7.3% in November.

On a month-on-month basis, prices rose by 0.1% on November, compared to 0.4% in October.

Stripping out food and energy prices, inflation against the previous month was 0.2% in November, lower than the 0.3% FX-Street cited consensus and slowing from 0.3% in October. The stat bureau emphasised that November's rise was the "smallest increase since August 2021."

Although the Federal Reserve's Federal Open Market Committee will likely still raise rates by 50 basis points on Wednesday, the weaker-than-expected inflation reading could convince the US Federal Reserve to slow the pace of rate hikes sooner than anticipated in future meetings.

Pantheon Macroeconomics Economist Ian Shepherdson commented: "This report does not change tomorrow's Fed decision; they will hike by 50bp. But Chair Powell's tone likely will be less aggressively hawkish than in November, and his more dovish colleagues likely will be emboldened by this report.

"We now think 25bp is more likely on Feb 1, and we think that will be the final hike. Disinflationary pressure has been visible in the pipeline for some time, but now it is emerging where it counts, in the consumer data. In the wake of the CPI and PPI reports, we think the core PCE deflator rose only 0.1% in November," Shepherdson continued.

Other markets also benefitted from the inflation reading.

In European equities on Monday, the CAC 40 in Paris ended up 1.4%, while the DAX 40 in Frankfurt ended up 1.3%.

Stocks in New York were higher at the London equities close, with the DJIA up 0.6%, the S&P 500 index up 1.2%, and the Nasdaq Composite up 1.7%.

The dollar weakened. The pound was quoted at USD1.2378 at the close on Tuesday in London, higher compared to USD1.2267 at the stock-market close on Monday.

The euro stood at USD1.0643, higher against USD1.0538. Against the yen, the dollar was trading at JPY135.10 lower compared to JPY137.54.

Gold was priced at USD1,813.25 an ounce, significantly higher against USD1,782.67.

Investors were searching for good news after figures from this morning showed the UK unemployment rate increased in the three months to October.

Figures from the Office of National Statistics showed the UK unemployment rate rose to 3.7% from August to October, up from 3.6% in the previous period of May to July.

"The increasing fragility of the UK economy is showing up in the labour market with unemployment edging up as uncertainty about the future takes hold," said Susannah Street at Hargreaves Lansdown.

On the FTSE 100, InterContinental Hotels ended 0.4% higher.

It promoted Michael Glover to chief financial officer, with effect from March 20 next year.

Glover has been with InterContinental Hotels for 18 years and currently serves as CFO of the Americas and group head of Commercial Finance.

He succeeds Paul Edgecliffe-Johnson who had announced his intention to retire back in October. Edgecliffe-Johnson will step down as CFO on March 19 and become the CFO of sports betting & gambling company Flutter Entertainment.

Oil companies Shell and BP were boosted by higher oil prices. They finished 1.0% and 1.8% higher respectively.

Brent oil was quoted at USD81.03 a barrel at the close in London on Monday, up from USD78.33 late Monday.

Oanda analyst Craig Erlam commented: "Oil prices are advancing again on Tuesday, with Brent approaching USD80 a barrel and WTI nearing USD75. This comes amid further relaxations of Covid curbs in China, the threat of lower Russian output in response to the G7 price cap, an outage on the keystone pipeline in the US, and the promise of US purchases around USD70."

Chemring closed 1.2% higher.

The Romsey, Hampshire-based defence technology reported a double-digit rise in revenue and said its annual results exceeded its initial expectations, as it noted that the war in Ukraine increased broad support for long-term defence investment in a "riskier world".

In the financial year that ended October 31, revenue rose 13% to GBP442.8 million from GBP393.3 million the previous year, while pretax profit climbed 6.1% to GBP51.8 million from GBP48.8 million.

"The medium-term outlook for the European market is positive, and several opportunities for our niche capabilities can be anticipated. Against the new geostrategic backdrop, the group will continue to support the requirements of European allied nations," Chemring said.

On AIM, Begbies Traynor finished 6.5% lower.

The Manchester-based business recovery, financial advisory and property services consultancy said pretax profit in the six months that ended October 31 was GBP5.0 million, up 85% from GBP2.7 million a year earlier. Revenue increased by 12% to GBP58.5 million from GBP52.3 million.

Begbies Traynor said it saw strong half-year performance, with double-digit revenue and profit growth in both its business recovery and financial advisory division and its property advisory and transactional services division.

AJ Bell's Russ Mould commented: "Good news for insolvency practitioner Begbies Traynor tends to be bad news for almost everyone else. The company is seeing momentum build across its business – most notably in the insolvency part as UK businesses struggle with weak consumer sentiment, surging costs and rising interest rates. Soberingly, Begbies expects to continue to do well moving forward which suggests it can see that there are a large number of firms which are close to the brink."

In Wednesday's economic calendar there is UK PPI due out at 0700 GMT and the UK house price index at 0930. This is followed by the US Federal Reserve's interest rate decision at 1900 GMT.

In the corporate calendar there's full year results from Tui and IntegraFin Holdings as well as half year results from Watches of Switzerland.

By Chris Dorrell, Alliance News reporter

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