London close: Stocks gain after higher-than-expected UK inflation data

London stocks gained on Tuesday even as data revealed UK inflation rose to its highest level in 22 months in September and as US inflation jumped in line with forecasts.

At the the close the FTSE 100 ended up 0.76% to 7,000.06 points while the pound rose 1.06% against the dollar to $1.2312.

The UK consumer price index increased an annualised 1.0% in September following a 0.6% gain in August, according to the Office for National Statistics. Economists had forecast a 0.9% rise.

The pick-up in inflation was driven by clothing and fuel prices.

On a month-on-month comparison, CPI rose 0.2% in September, in line with estimates and after a 0.3% rise in August.

Core inflation jumped at a year-on-year pace of 1.5% last month after a 1.3% increase in August, ahead of forecasts for a 1.4% rise.

Bank of England Governor Mark Carney last week warned that inflation will rise as weaker post-Brexit pound makes import costs more expensive.

"While the ONS found no direct evidence that the pound's fall has fed through to higher inflation, the link is clear from business surveys,” said Chris Williamson, chief economist at IHS Markit.

“The IHS Markit PMI surveys found companies' costs to have risen at the fastest rate for just over five years in September, with many firms blaming higher import costs resulting from the steep drop in the value of the pound, especially against the US dollar and euro.”

To take of as well, a government lawyer told the High Court in London that parliament will "very likely" have to ratify any British deal to quit the European Union (EU), possibly putting a bid into both Sterling and Gilts.

The comment by lawyer James Eadie, one of those representing the Theresa May-led Tory government, came amid a legal challenge on who has the right to trigger Article 50 of the Lisbon Treaty.

Across the Atlantic, the US consumer price index rose 1.5% year-on-year in September, its biggest annualised increase since October 2014 and as expected by analysts, following a 1.1% increase the previous month. The Labor Department said the rise was driven by increases in housing and energy prices.

On a month-on-month comparison, CPI edged up 0.3% in September after a 0.2% gain in August, which also matched estimates.

“With US inflation coming in as expected at 0.3% at a monthly basis and 1.5% annually, the Federal Reserve seemingly got another green light to raise rates before the end of 2016 – Clinton-election win permitting, that is,” said Connor Campbell, financial analyst at Spreadex.

In company news, Next rallied on the back of a positive note by Deutsche Bank, which pointed out that in a difficult period for the UK clothing market, the company continues to gain market share.

EasyJet flew higher despite an earnings downgrade from peer Ryanair, which reduced its full-year net profit guidance by 5% to a range of €1.30bn to €1.35bn as a result of the 18% drop in sterling following the Brexit vote.

Tesco was in the black after data from Kantar Worldpanel showed the supermarket grew its market share in the last three months for the first time in five years. Tesco grew sales by 1.3% and market share by 0.1 percentage point to 28.2%.

Luxury retailer Burberry was under pressure. Although the group’s like-for-like sales improved in the second quarter thanks to a spike in fashion-conscious tourists to the UK, wholesale revenues cast a stain on the results.

Education publisher Pearson was on the back foot after Deutsche Bank said the company has a “hill to climb to get to 2918 targets”.

Market Movers

FTSE 100 (UKX) 7,000.06 0.76%
FTSE 250 (MCX) 17,972.74 1.01%
techMARK (TASX) 3,534.80 0.49%

FTSE 100 - Risers

Next (NXT) 4,744.00p 5.33%
easyJet (EZJ) 918.00p 5.09%
Marks & Spencer Group (MKS) 333.70p 4.31%
Royal Bank of Scotland Group (RBS) 177.60p 4.23%
Persimmon (PSN) 1,721.00p 3.43%
Polymetal International (POLY) 879.00p 3.41%
Tesco (TSCO) 208.15p 3.40%
Capita (CPI) 603.00p 3.34%
Barratt Developments (BDEV) 483.80p 3.22%
Glencore (GLEN) 237.30p 3.22%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,403.00p -7.21%
Pearson (PSON) 743.00p -2.56%
Rolls-Royce Holdings (RR.) 761.00p -1.62%
Johnson Matthey (JMAT) 3,456.00p -0.95%
Paddy Power Betfair (PPB) 8,625.00p -0.86%
DCC (DCC) 6,695.00p -0.81%
Intertek Group (ITRK) 3,568.00p -0.56%
Reckitt Benckiser Group (RB.) 7,327.00p -0.43%
British American Tobacco (BATS) 4,798.00p -0.40%
Worldpay Group (WI) (WPG) 288.00p -0.35%

FTSE 250 - Risers

Restaurant Group (RTN) 385.60p 9.11%
Domino's Pizza Group (DOM) 340.00p 6.45%
Bellway (BWY) 2,386.00p 6.04%
Ocado Group (OCDO) 267.50p 5.15%
Aggreko (AGK) 957.50p 4.42%
Aldermore Group (ALD) 170.80p 4.27%
Halfords Group (HFD) 342.00p 3.95%
Hochschild Mining (HOC) 265.20p 3.59%
Computacenter (CCC) 705.50p 3.52%
Ibstock (IBST) 165.40p 3.50%

FTSE 250 - Fallers

Vectura Group (VEC) 133.60p -3.47%
Petrofac Ltd. (PFC) 903.50p -3.06%
Senior (SNR) 203.50p -2.58%
Dignity (DTY) 2,766.00p -1.39%
GVC Holdings (GVC) 725.00p -1.29%
Millennium & Copthorne Hotels (MLC) 442.60p -0.98%
TalkTalk Telecom Group (TALK) 210.70p -0.85%
Sophos Group (SOPH) 242.20p -0.78%
Shawbrook Group (SHAW) 229.80p -0.78%
PayPoint (PAY) 1,092.00p -0.73%