London close: Stocks rise as US inflation comes in hot

London stocks closed in positive territory on Thursday, as investors digested a higher-than-expected inflation reading out of the United States.

The FTSE 100 ended the session up 0.35% at 6,850.27, and the FTSE 250 was ahead 1.91% at 16,929.26.

Sterling was also in the green, last trading up 2.3% on the dollar at $1.1355, and strengthening 1.44% against the euro to change hands at €1.1604.

“The UK government’s torrid time goes on,” said IG chief market analyst Chris Beauchamp.

“It looks like the market is pricing in a rising probability that a major u-turn - and even potentially several u-turns - will improve the UK’s fiscal outlook while simultaneously leaving the new prime minister and her chancellor looking like they are unable to control events.”

In data, the cost of living stateside last month edged past forecasts last month at both the headline and so-called core level.

According to the Department of Labor, the consumer price index increased by seasonally-adjusted 0.4% on the month, and at an annual clip of 8.2%.

Economists had pencilled in a 0.2% rise month-on-month, and a year-on-year increase of 8.1%.

In August, headline CPI advanced at a 8.1% pace.

At the core level, which excludes the often-volatile food and energy price components, CPI was up by 6.6% in comparison to a year ago.

That compared to consensus forecasts for an acceleration to 6.5%, from the 6.3% clip observed in August.

“Today’s CPI data and the still robust pace of price increases in producer price data released yesterday provide the Fed with little option but a fourth consecutive 75-basis point rate hike at their November meeting,” said Berenberg’s Mickey Levy.

“Moreover, the strength of core inflation also introduces upside risks to our current call for a 50-basis point rate hike in December, and raises the probability the policy rate rises above our current call for a 4.75% terminal rate.

“Inflation data for October will likely provide the Fed with little solace.”

On home shores, UK house prices looked set to fall in the coming months as soaring borrowing costs weighed on demand.

According to the latest RICS UK residential market survey, house price growth continued to slow in September, with a national net balance of 32.

That was well below both August’s balance of 51, and consensus expectations of 45.

House price growth had now been slowing since April, when the net balance reached a record high of 78, and respondents said they expected that trend to continue.

The government recently doubled the threshold for stamp duty to £250,000, but respondents said that any potential uplift from the tax cut was likely to be wiped out by "substantial" rises in mortgage rates.

As a result, 12-month expectations for house prices had turned negative, with a net balance of -18 against August’s reading of 3.

Sales also fell in September, to the most negative reading since May 2020, while new buyer interest eased to -36, a fifth month of decline.

New instructions were also weaker, with stock levels remaining at historic lows.

“The turmoil in mortgage markets in recent weeks has compounded the increasing level of economic uncertainty, resulting from higher energy bills and the wider cost of living crisis, in shifting the dial in the housing market,” said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

“Even though the headline price balance remains in positive territory for now, storm clouds are visible in the deterioration of near-term expectations for both pricing and sales.”

Rubinsohn also warned that mortgage arrears and repossessions, currently at historic lows, were "inevitably" going to increase over the next year.

On the continent, German inflation surged to 10% last month according to official data, the highest rate since the country’s reunification.

According to Destatis, the annual consumer price index was 10% in September, compared to August’s rate of 7.9%.

The figure was in line with both initial estimates and consensus, while the month-on-month rate was 1.9%.

Destatis said the harmonised index of consumer prices was 10.9% annually, also in line with consensus, and 2.2% month-on-month.

In energy markets, a decision by OPEC to cut oil supplies could tip the global economy into recession, the International Energy Agency warned earlier.

The cartel and its allies, including Russia, agreed a bigger-than-expected cut in oil production targets on 5 October, causing an angry response from Washington and sending oil prices sharply higher.

Biden had urged OPEC+ not to curb production amid already tight global supplies, but despite international pressure, the group of oil producers agreed to cut output by two million barrels per day, well above predictions for a reduction of one million to 1.5 million barrels.

Publishing its monthly oil report on Thursday, the IEA cut its forecasts for demand growth in response, to 1.9 million barrels per day in 2022 and 1.7m barrels per day in 2023, down by 60,000 and 470,000 barrels respectively since its last report.

On London’s equity markets, Close Brothers was 1.69% lower as its shares traded without entitlement to the dividend.

Stock in bingo hall and casino operator Rank Group fell 10.8% after it reported weaker customer spending, and warned of challenging times ahead as consumers tightened their belts.

On the upside, Ladbrokes owner Entain jumped 4.09% after it posted an uptick in third-quarter net gaming revenue, and said online gaming revenue for the fourth quarter was expected to rise, thanks in part to the World Cup.

Banks were among the top performers, with NatWest Group up 7.67%, Lloyds Banking Group ahead 6.86%, and Barclays 5.06% higher.

NatWest was in focus after it confirmed the closure of 43 branches across the UK as it looked to move online.

Low-cost airline easyJet ascended 2.67% after saying it expected to report annual pre-tax losses of £170m to £190m, as it flew 88% of pre-Covid capacity in the fourth quarter.

IAG shares shot 7.98% higher after the Iberia and British Airways owner said it now expected to report a third-quarter operating profit of around €1.2bn.

In a brief and unscheduled update, the company said trading in the third quarter was better than expected, due to passenger revenue strength.

"Forward bookings remain at expected levels for the time of year, with no indication of weakness, and accordingly our fourth quarter expectations remain unchanged as of today," it said.

Customised electronics maker discoverIE Group was ahead 7.83% after the company reported a rise in first-half sales and said it was on track to deliver annual underlying earnings in line with expectations, driven by a stronger-than-expected order book.

Sales were up 23% year on year on a constant exchange rates basis.

Oxford Instruments gained 7.3% after the firm said it made good progress in the half-year to 30 September, amid continued strong demand for its products and services.

On a constant currency basis, orders were ahead of revenue during the period and ahead of orders for the first half of last year.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 6,850.27 0.35%
FTSE 250 (MCX) 16,929.26 1.91%
techMARK (TASX) 4,071.46 0.31%

FTSE 100 - Risers

Ocado Group (OCDO) 435.80p 10.86%
International Consolidated Airlines Group SA (CDI) (IAG) 108.80p 7.98%
NATWEST GROUP (NWG) 228.70p 7.67%
Lloyds Banking Group (LLOY) 41.77p 6.86%
Legal & General Group (LGEN) 217.30p 6.47%
Melrose Industries (MRO) 101.35p 6.08%
Next (NXT) 4,648.00p 6.05%
Rolls-Royce Holdings (RR.) 70.01p 5.69%
JD Sports Fashion (JD.) 94.02p 5.40%
Persimmon (PSN) 1,196.50p 5.09%

FTSE 100 - Fallers

Fresnillo (FRES) 728.20p -4.08%
Halma (HLMA) 2,015.00p -3.12%
Endeavour Mining (EDV) 1,481.00p -3.01%
Relx plc (REL) 2,157.00p -2.84%
Croda International (CRDA) 6,362.00p -2.75%
Reckitt Benckiser Group (RKT) 5,760.00p -2.54%
Unilever (ULVR) 3,838.00p -2.42%
Diageo (DGE) 3,615.50p -2.22%
GSK (GSK) 1,331.00p -2.05%
AstraZeneca (AZN) 9,780.00p -1.56%

FTSE 250 - Risers

TI Fluid Systems (TIFS) 121.60p 9.55%
Virgin Money UK (VMUK) 127.75p 8.28%
Crest Nicholson Holdings (CRST) 186.20p 8.19%
Discoverie Group (DSCV) 675.00p 7.83%
Playtech (PTEC) 506.00p 7.66%
Oxford Instruments (OXIG) 1,846.00p 7.33%
IP Group (IPO) 56.65p 7.19%
Paragon Banking Group (PAG) 392.00p 7.10%
Bellway (BWY) 1,732.00p 6.91%
Redrow (RDW) 397.20p 6.60%

FTSE 250 - Fallers

TP Icap Group (TCAP) 182.40p -3.34%
CLS Holdings (CLI) 131.40p -2.67%
Drax Group (DRX) 500.50p -2.15%
Fidelity China Special Situations (FCSS) 205.50p -2.14%
Close Brothers Group (CBG) 903.00p -1.69%
JPMorgan Japanese Inv Trust (JFJ) 426.00p -1.62%
Templeton Emerging Markets Inv Trust (TEM) 138.40p -1.57%
Capital & Counties Properties (CAPC) 95.10p -1.40%
Spirent Communications (SPT) 247.80p -1.35%
Baillie Gifford Japan Trust (BGFD) 703.00p -1.26%