London close: Stocks mixed amid hotter-than-hoped US inflation

London stocks were mixed at the close on Tuesday, as investors mulled faster-than-expected inflation in the US, while unemployment in the UK remained stable.

The FTSE 100 ended the session up 0.08% at 7,953.85, while the FTSE 250 was 0.53% weaker at 20,018.23.

Sterling was in positive territory, last trading up 0.26% on the dollar at $1.2171, as it strengthened 0.25% against the euro to change hands at €1.1346.

“Today has been a largely mixed affair for markets on either side of the pond, with US risk-off momentum failing to inhibit European investor optimism,” said IG senior market analyst Joshua Mahony.

“On a day that was always going to be heavily driven by economic data, the UK has managed to emerge with a positive jobs outlook but concerns over the need to tighten interest rates further.

“Higher employment, lower claims, and a quickening pace of growth in earnings minus bonuses signals to the Bank of England that there is a need and ability to go further in their bid to combat inflation.”

In economic news from across the pond, the cost of living in the US increased by more than expected at the start of the year, as energy and shelter costs pushed up on headline and core inflation.

According to the Department of Labor, the country's consumer price index rose by 0.5% month-on-month.

That was a tenth of a percentage point more than anticipated by economists in a poll by Dow Jones Newswires.

Food and energy costs jumped by 0.5% and 2.0% on the month, respectively

In comparison to a year earlier, headline CPI was ahead by 6.4%, which was down from an upwardly-revised 6.5% for the month before.

At the core level, CPI was ahead by 0.4% on the month, above expectations for 0.3%, and by 5.6% year-on-year.

New vehicle prices edged up by just 0.2% and those for used cars and trucks declined by 1.9% when compared with the previous month.

Prices of apparel, however, rose by 0.8%, and those of medical care commodities by 1.1%.

But the biggest driver of inflation at the core level came from a 0.7% rise on the month in shelter prices, while medical care service prices fell by 0.7%.

"All told, risks are weighted toward inflation being higher in the first half of this year than we anticipated in the February baseline," said Ryan Sweet, chief US economist at Oxford Economics.

"Still, inflation should moderate more noticeably in the second half of this year as goods disinflation intensifies and services inflation peaks."

On home shores, regular pay in the UK grew more than expected in the final three months of last year, but real pay kept falling, according to the Office for National Statistics.

The unemployment rate was stable at 3.7% in December, while annual wage growth rose by 6.7% in the period between October and December, up from 6.5% and ahead of expectations for it to remain flat.

According to the ONS, it was the fastest rate of growth seen outside of the pandemic, but taking inflation into account, it marked a 2.5% decline.

The number of people in employment rose by 74,000 in the period between October and December to 32.8m, taking the employment rate to 75.6%, up 0.2 percentage points.

A total of 843,000 working days were meanwhile lost in December because of strike action - the highest figure since November 2011.

The data also showed that in November 2022 to January 2023, vacancies fell by 76,000 on the quarter to 1,134,000, marking the seventh consecutive quarterly fall since May to July 2022.

“December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth,” noted Capital Economics.

“The Bank of England will be increasingly concerned about the persistence of domestic inflationary pressures as private sector wage growth excluding bonuses exceeded its forecast.

“This supports our view that the Bank of England will have to raise interest rates from 4.00% now to a peak of 4.50% in the coming months.”

On the continent, economic growth in the eurozone slowed in the final quarter of last year, according to final data from Eurostat.

GDP expanded by 0.1% on the quarter, down from 0.3% in the third quarter, but in line with the initial estimate and consensus expectations.

On the year, growth slowed to 1.9% in the fourth quarter from 2.4% in the prior three months, which was also in line with the initial estimate.

Finally on data, Japan's economy grew more slowly than expected at the end of 2022 amid restrained household spending and business investment.

According to the country’s Cabinet Office, during the fourth quarter gross domestic product expanded at a seasonally-adjusted quarterly annualised pace of 0.6% - well below expectations for growth of 2.0%.

Third quarter GDP growth was meanwhile revised downwards to -1.0% from a prior reading of -0.8%.

On London’s equity markets, Coca-Cola HBC jumped 4.97% after well-received full-year results, while Vodafone Group advanced 3.43% after Liberty Global bought a 4.9% stake in the company.

EasyJet flew 3.91% higher after an upgrade to ‘buy’ from ‘sell’ at Deutsche Bank.

Plus500 managed gains of 0.79% after it posted a 16% jump in full-year revenues to $832.6m, and a 17% increase in earnings before interest, taxes, depreciation and amortisation to $453m.

Holiday operator TUI gained 0.67% after it said summer bookings were up 20% and reported a narrowing of first-quarter losses, as travel continued to rebound from the effects of the Covid pandemic.

Gambling company Flutter Entertainment rose 1.79% after saying it was considering a US listing and would start consulting shareholders on the matter as its FanDuel operation grew in importance to the group.

Elsewhere, Drax Group was lifted 1.52% after JPMorgan Cazenove raised its price target to 900p from 850p and said it remained on its ‘Positive Catalyst Watch’ into results later this month.

The bank - which maintained its ‘overweight’ rating - noted that Drax shares were trading in line with early-December levels, despite having since seen a strong trading update and a significant improvement to the government’s proposed Electricity Generation Levy.

On the downside, Tullow Oil lost 2.44% after it filed requests for arbitration with the International Chamber of Commerce in London over a $387m tax dispute with Ghana.

The tax assessments relate to the disallowance of loan interest deductions for the fiscal years 2010 to 2020, and proceeds received by Tullow under its business interruption insurance policy.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,953.85 0.08%
FTSE 250 (MCX) 20,018.23 -0.53%
techMARK (TASX) 4,569.81 0.07%

FTSE 100 - Risers

Coca-Cola HBC AG (CDI) (CCH) 2,038.00p 4.97%
Vodafone Group (VOD) 97.22p 3.43%
BT Group (BT.A) 138.30p 3.13%
Airtel Africa (AAF) 126.50p 2.18%
International Consolidated Airlines Group SA (CDI) (IAG) 165.38p 1.92%
Flutter Entertainment (CDI) (FLTR) 12,770.00p 1.79%
Sainsbury (J) (SBRY) 264.40p 1.61%
Abrdn (ABDN) 214.00p 1.42%
Lloyds Banking Group (LLOY) 53.79p 1.36%
Hargreaves Lansdown (HL.) 947.80p 1.28%

FTSE 100 - Fallers

United Utilities Group (UU.) 1,053.50p -2.05%
Severn Trent (SVT) 2,794.00p -1.90%
Persimmon (PSN) 1,409.50p -1.85%
JD Sports Fashion (JD.) 178.35p -1.44%
Land Securities Group (LAND) 702.80p -1.21%
Scottish Mortgage Inv Trust (SMT) 739.00p -1.20%
Halma (HLMA) 2,220.00p -1.20%
GSK (GSK) 1,470.00p -1.18%
Standard Chartered (STAN) 721.60p -1.12%
Haleon (HLN) 328.10p -1.07%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 198.00p 5.49%
easyJet (EZJ) 488.60p 3.91%
Darktrace (DARK) 256.50p 3.18%
Wizz Air Holdings (WIZZ) 2,810.00p 2.78%
Shaftesbury (SHB) 428.80p 2.10%
Centamin (DI) (CEY) 100.55p 2.00%
TP Icap Group (TCAP) 180.30p 1.63%
Capricorn Energy (CNE) 249.00p 1.55%
Crest Nicholson Holdings (CRST) 237.80p 1.54%
Drax Group (DRX) 636.50p 1.52%

FTSE 250 - Fallers

Mitchells & Butlers (MAB) 157.70p -4.48%
Bakkavor Group (BAKK) 108.60p -3.89%
Genuit Group (GEN) 316.00p -3.81%
Bridgepoint Group (Reg S) (BPT) 240.20p -3.77%
C&C Group (CDI) (CCR) 154.00p -3.45%
Chemring Group (CHG) 284.00p -3.40%
Pennon Group (PNN) 889.00p -3.16%
Baltic Classifieds Group (BCG) 142.00p -3.01%
FirstGroup (FGP) 111.50p -2.97%
Essentra (ESNT) 228.50p -2.77%