London close: Stocks rally as China inflation improves, Tesco/Unilever resolve issues

London stocks closed in the green on Friday following better-than-expected Chinese inflation data and after Tesco resolved its pricing dispute with Unilever.

China’s consumer price index rose 1.9% year-on-year in September following a 1.3% increase in August. Economists had pencilled in a 1.6% gain.

Producer prices climbed 0.1% last month, beating forecasts for a 0.4% drop and following August’s 0.8% decline.

“If yesterday’s deterioration in Chinese exports pointed towards the potential for further easing from the PBoC, today’s surprise spike in both consumer and producer prices does the opposite, proving that the inflation picture is on the right track,” said IG’s Joshua Mahony.

Closer to home, Tesco was a top riser on the FTSE 100 after Unilever said issues surrounding the supply of its leading brands including Marmite to the supermarket have been resolved.

The two companies were at loggerheads after Unilever said it wanted to raise its prices by about 10% to compensate for the plunge in the value of the pound.

Bank of England Governor Mark Carney on Friday said inflation will likely rise on products such as food due to the fall in the value of the pound amid Brexit worries. He said the sterling's fall "helps the economy adjust" but admitted it would be harder on consumers. He also said the BoE was willing to “tolerate a bit of an overshoot” on the 2% inflation target to avoid unnecessary unemployment and support economic growth.

In other UK news, construction output unexpectedly fell in August, according to the Office for National Statistics.

Construction output fell 1.5% on the month, following revised growth of 0.5% in July. Analysts had expected a 0.2% increase.

In the US, retail sales rose 0.6% in September, as expected by analysts, following a revised 0.2% fall in August, the Commerce Department revealed.

Elsewhere, a survey from the University of Michigan found consumer sentiment in the US unexpectedly deteriorated in October, dropping to its lowest level since last September and the second-lowest in the past two years.

The preliminary reading of the consumer sentiment index fell to 87.9 from 91.2 in September and 90.0 in October last year. Economists had been expecting a reading of 91.9.

Federal Reserve chair Janet Yellen was due to speak in Boston at 1700 BST, with investors hoping she’ll provide hints on whether the central bank will raise interest rates this year.

US earnings were also in focus. JP Morgan Chase, Citigroup and Wells Fargo racked up healthy gains as their third-quarter numbers beat forecasts.

Among London-listed corporate stocks, mining shares fell as metal prices dropped. Antofagasta, Randgold Resources and Fresnillo slid.

Capita rallied despite being handed down a €1.15m fine by the Central Bank of Ireland for breaching “the most fundamental of regulatory requirements”.

The company offered unauthorised investment services to customers over a nine-year period, creating unnecessary market, investor and customer risks, the Central Bank said.

Provident Financial slumped after it confirmed its performance during the third quarter was in-line with management’s own expectations but said its online, short-term loans business Satsuma will no longer make a profit this year.

Man Group surged after the hedge fund manager said funds under management rose 6% in the quarter ended 30 September to $80.7bn, with net inflows of $1.3bn, and announced an agreement to acquire asset manager Aalto Invest Holding AG.

William Hill gained after shareholder Parvus Asset Management said late on Thursday that it opposed the bookmaker’s £4.5bn merger with Canada’s Amaya. Parvus, which owns a 14% stake in the company, said the deal had “limited strategic logic and would destroy shareholder value”. It added that William Hill should consider a sale of the company.

Shares in temporary power supplier Aggreko were under pressure after Peel Hunt downgraded the stock to ‘reduce’ from ‘hold’ and cut the price target to 900p from 1,200p.

Market Movers

FTSE 100 (UKX) 7,013.55 0.51%
FTSE 250 (MCX) 17,980.18 0.58%
techMARK (TASX) 3,544.04 0.36%

FTSE 100 - Risers

Tesco (TSCO) 203.70p 4.41%
Mediclinic International (MDC) 914.50p 3.27%
Marks & Spencer Group (MKS) 326.50p 2.29%
Pearson (PSON) 832.50p 2.27%
Informa (INF) 662.00p 2.24%
Barclays (BARC) 170.15p 2.19%
Capita (CPI) 590.50p 2.16%
International Consolidated Airlines Group SA (CDI) (IAG) 379.40p 2.13%
BHP Billiton (BLT) 1,208.50p 2.07%
Burberry Group (BRBY) 1,530.00p 2.00%

FTSE 100 - Fallers

Antofagasta (ANTO) 520.00p -3.61%
Randgold Resources Ltd. (RRS) 6,800.00p -3.27%
Fresnillo (FRES) 1,620.00p -2.76%
Ashtead Group (AHT) 1,315.00p -2.38%
Polymetal International (POLY) 849.50p -1.56%
Unilever (ULVR) 3,545.50p -1.42%
Provident Financial (PFG) 3,036.00p -1.40%
Glencore (GLEN) 228.25p -1.13%
DCC (DCC) 6,940.00p -1.07%
Persimmon (PSN) 1,706.00p -0.99%

FTSE 250 - Risers

Man Group (EMG) 123.70p 13.80%
PayPoint (PAY) 1,168.00p 10.50%
Tullow Oil (TLW) 280.80p 5.80%
William Hill (WMH) 313.40p 4.82%
Serco Group (SRP) 136.30p 4.52%
Drax Group (DRX) 311.00p 3.53%
Entertainment One Limited (ETO) 232.80p 3.51%
Vedanta Resources (VED) 635.00p 3.34%
Grafton Group Units (GFTU) 510.50p 3.07%
ICAP (IAP) 469.50p 3.01%

FTSE 250 - Fallers

Centamin (DI) (CEY) 144.40p -3.28%
Domino's Pizza Group (DOM) 330.60p -3.08%
Countrywide (CWD) 196.50p -2.82%
Acacia Mining (ACA) 453.90p -2.66%
Aggreko (AGK) 940.00p -2.59%
Ibstock (IBST) 157.70p -2.29%
Debenhams (DEB) 54.95p -2.14%
Assura (AGR) 58.55p -2.01%
Moneysupermarket.com Group (MONY) 277.00p -1.95%
Crest Nicholson Holdings (CRST) 411.90p -1.65%