London close: Stocks finish higher as US inflation slows

London stocks ended the week on a positive note on Friday, with NatWest a standout performer, as investors digested a dip in inflation from across the pond.

The FTSE 100 rose 1.21%, closing at 8,285.71 points, while the FTSE 250 saw an even more pronounced rise of 2.26%, finishing at 21,356.30 points.

In currency markets, sterling was last up 0.13% on the dollar, trading at $1.2868, while it saw a slight decline of 0.02% against the euro, last changing hands at €1.1847.

“The FTSE 100 looks set to end the week on a high despite a continued sell-off in US tech names,” commented Danni Hewson, head of financial analysis at AJ Bell, earlier.

“After a week dominated by the reaction to US corporate announcements, attention may shift back to the macroeconomic backdrop later with the release of core PCE data - the Federal Reserve’s preferred measure of inflation.

“The market will be hoping for a reading which reinforces hopes of a rate cut at the Fed’s September meeting.”

American spending remains steady despite slower inflation

In economic news, Americans maintained steady spending despite a slowdown in inflation in June, although income growth fell short of expectations.

According to the Department of Commerce, personal incomes and spending both grew by 0.2% and 0.3%, respectively, on a month-on-month basis, after seasonal adjustments.

Economists had predicted a higher increase of 0.4% in incomes.

Notably, personal consumption expenditures for April and May were revised upwards.

The headline PCE inflation rate edged up by 0.1% in June following a flat May, bringing the annual rate down from 2.6% to 2.5%, as expected.

Core PCE prices, which exclude food and energy, rose by 0.2% month-on-month, keeping the annual rate steady at 2.6%, slightly above the consensus of 2.5%.

The Federal Reserve aims for a 2.0% inflation rate as measured by core PCE prices.

“The Fed will want to see a bit more data before it has the confidence that the trend will be sustained,” said Michael Pearce, deputy chief US economist at Oxford Economics.

“We expect a rise in gas prices, and while the weak readings in the second half of last year will mean the year-over-year inflation rate stalls out close to 2.5% over coming months.

“But barring another upside surprise to inflation similar to the one we saw in the first quarter of this year, we do not think that would derail the Fed from delivering a first rate cut at its September meeting.”

On home shores, the Competition and Markets Authority (CMA) revealed that weakened competition among fuel retailers resulted in drivers overpaying by more than £1.6bn in 2023.

The regulator's analysis highlighted a significant increase in retail fuel margins, particularly at supermarkets where margins had doubled since 2019.

Its third interim monitoring update pointed to persistent market competition failures, as previously noted in its July 2022 road fuel market study.

The CMA had recommended a smart data-driven fuel finder scheme to provide real-time price comparisons, potentially saving drivers up to £4.50 per fill-up.

Although some progress had been made, with major retailers starting to share price data, the current scheme covers only 40% of fuel retail sites, limiting its effectiveness.

The CMA said it supports the introduction of the Digital Information and Smart Data Bill to mandate comprehensive fuel price data sharing.

In the meantime, it urged the government to implement a strong voluntary interim scheme to give consumers quicker access to fuel price information.

NatWest and Drax jump, Rightmove in the red

On London’s equity markets, NatWest Group surged 7.04% after the bank raised its full-year income guidance to around £14bn, up from the previous range of £13bn to £13.5bn.

The company also announced an increase in its return on tangible equity forecast to above 14%, surpassing the earlier estimate of 12%.

“Overall, this is a highly reassuring update which has received a very warm welcome in opening exchanges,” said Richard Hunter, head of markets at Interactive Investor.

“The share price bounce adds to an increase of 35% over the last year, as compared to a gain of 6.6% for the wider FTSE 100, and is further evidence of the momentum which propelled the price by 55% in the last six months alone.

“NatWest has delivered an outcome which could mean that it regains its spot as the preferred play on the sector, recently being edged out by Barclays, with a market consensus which comes in at a comfortable buy.”

Drax Group meanwhile rocketed 13.67% after it said its full-year adjusted EBITDA was expected to be at the upper end of analysts’ consensus estimates, ranging from £881m to £996m, following a robust first-half performance.

Jupiter Fund Management and Man Group also performed well, with increases of 6.79% and 3.09%, respectively, buoyed by results announcements.

Babcock International Group saw gains of 8.65% after posting a significant jump in full-year profit, driven by a sustained uplift in global defence budgets and strong performance in its Nuclear, Land, and Aviation sectors.

IMI rose by 3.11% after reporting strategic progress and a solid financial performance in the first half, highlighting growth in organic revenue and profits.

Computacenter managed to reverse earlier losses, ending the day up 0.23%.

Despite expecting a drop in first-half profit due to order delays in North America, the company announced a £200m share buyback programme, which helped lift its shares.

Lloyds Banking Group also reversed earlier losses, ending marginally higher by 0.03%, even after being downgraded to ‘sector perform’ from ‘outperform’ by RBC Capital Markets.

On the downside, Segro fell by 1.55%, despite reporting a 14.6% increase in first-half adjusted pre-tax profit and continued strong performance.

Real estate portal operator Rightmove edged down 1.41%, although it reported growth in both revenue and operating profits for the six months ended 30 June, driven by continued demand from agents and new home developers.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,285.71 1.21%
FTSE 250 (MCX) 21,356.30 2.26%
techMARK (TASX) 4,823.45 1.49%

FTSE 100 - Risers

NATWEST GROUP (NWG) 360.20p 6.54%
Anglo American (AAL) 2,380.00p 5.08%
Intertek Group (ITRK) 5,015.00p 4.26%
Burberry Group (BRBY) 743.40p 3.65%
JD Sports Fashion (JD.) 123.20p 3.27%
Diploma (DPLM) 4,358.00p 3.17%
IMI (IMI) 1,858.00p 3.11%
Airtel Africa (AAF) 110.20p 3.09%
Vistry Group (VTY) 1,376.00p 3.07%
Reckitt Benckiser Group (RKT) 4,510.00p 2.99%

FTSE 100 - Fallers

SEGRO (SGRO) 888.40p -2.07%
Fresnillo (FRES) 574.00p -1.37%
Pershing Square Holdings Ltd NPV (PSH) 3,772.00p -1.26%
Rightmove (RMV) 561.40p -1.16%
Lloyds Banking Group (LLOY) 60.38p -0.43%
Mondi (MNDI) 1,545.50p -0.23%
Imperial Brands (IMB) 2,149.00p -0.14%
InterContinental Hotels Group (IHG) 7,988.00p -0.10%
United Utilities Group (UU.) 1,009.00p 0.00%
RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 0.00%

FTSE 250 - Risers

Drax Group (DRX) 645.50p 13.95%
Babcock International Group (BAB) 530.00p 8.65%
Alpha Group International (ALPH) 2,650.00p 7.29%
CMC Markets (CMCX) 323.50p 7.12%
Jupiter Fund Management (JUP) 88.10p 6.79%
Marshalls (MSLH) 357.50p 6.24%
Bridgepoint Group (Reg S) (BPT) 274.00p 6.20%
Close Brothers Group (CBG) 548.50p 6.20%
Genuit Group (GEN) 504.00p 6.11%
NB Private Equity Partners Ltd. (NBPE) 1,740.00p 6.10%

FTSE 250 - Fallers

Discoverie Group (DSCV) 707.00p -3.02%
Bellevue Healthcare Trust (Red) (BBH) 145.60p -2.54%
Spirent Communications (SPT) 174.00p -1.69%
Carnival (CCL) 1,227.00p -0.89%
HICL Infrastructure (HICL) 123.00p -0.81%
Worldwide Healthcare Trust (WWH) 367.00p -0.54%
Tate & Lyle (TATE) 650.00p -0.46%
Hargreaves Lansdown (HL.) 1,100.50p -0.41%
ITV (ITV) 80.75p -0.37%
Wizz Air Holdings (WIZZ) 1,962.00p -0.25%