London close: Stocks rise as US inflation slows more than expected

London stocks ended Thursday on a high note, buoyed by favourable economic data from both sides of the Atlantic.

The FTSE 100 rose 0.36%, closing at 8,223.34 points, while the FTSE 250 saw a more substantial gain of 1.25%, ending the day at 21,188.91 points.

In currency markets, sterling was last up 0.52% on the dollar, trading at $1.2916, while it edged up 0.17% against the euro to change hands at €1.1884.

The market uptick was driven by a significant drop in US inflation, which came in lower than expected, and after encouraging UK GDP figures that exceeded forecasts.

“Markets spent the morning awaiting news of US inflation, though whispers of a good number had been doing the rounds since last night,” said IG chief market analyst Chris Beauchamp.

“Utility firms have buoyed the index all day, with traders buying into the sector following the Ofwat news this morning.

“The mood in London has been helped by the lack of any fresh turmoil in French politics, and as the shock of Sunday’s result continues to dissipate, European equities have also moved higher.”

Beauchamp added that for the tech sector, which had already enjoyed a strong period this month, there was little extra good news in the US inflation print.

“But for small caps, which have struggled all year, the news offered a real shaft of light.

“A Fed September rate cut is now much more likely, CPI perhaps completing the picture begun last week with the weaker payrolls report.

“Investors wary of putting more money to work in overstretched tech stocks ahead of a much-anticipated earnings season can now look instead at the US-focused small cap sector.”

US inflation reaches lowest level in a year, UK GDP rises more than expected

In economic news, US inflation reached its lowest level in a year in June, according to fresh data from the Department of Labor Statistics.

The consumer price index (CPI) rose by 3.0% annually, down from May's 3.3%, marking the third consecutive month of slowing inflation.

That figure was below the anticipated 3.1% and the lowest since June 2023.

Core inflation, excluding food and energy, also eased unexpectedly to 3.3% from 3.4%, surprising analysts who had predicted it to remain unchanged.

Energy prices saw significant moderation, with overall energy inflation dropping to 1.0% from 3.7%, gas prices turning negative, and fuel oil growth slowing.

In the labour market, US jobless claims decreased more than expected last week.

Initial unemployment benefit filings fell to 222,000 for the week ended 5 July, down from the previous week's revised 239,000 and below the forecasted 236,000.

The decline marked the first reduction in the four-week moving average in five weeks, indicating a potential strengthening of the labour market.

On home shores, the UK economy exhibited stronger-than-expected growth in May, according to the Office for National Statistics.

The UK's real GDP increased by 0.4% for the month, surpassing the anticipated 0.2% rise and recovering from a stagnant April.

That growth was primarily driven by a 1.9% surge in the construction sector, which rebounded from April’s decline due to poor weather.

Production output also improved slightly, and the services sector maintained steady growth.

Over the three months to May, GDP rose by 0.9%, the fastest rate in over two years, propelled by a 1.1% increase in services output.

“The economy grew strongly in May, with all three main sectors seeing increases,” said Liz McKeown, director of economic statistics at the ONS.

“Many retailers and wholesalers had a good month, with both bouncing back from a weak April.

“Construction grew at its fastest rate in almost a year after recent weakness, with house building and infrastructure projects boosting the industry.”

In Germany, inflation moderated in June, with the federal statistics agency confirming a decrease to 2.2% from May's 2.4%.

On a harmonised basis, to align with other EU countries, consumer prices rose by 2.5% year-on-year, up 0.2% from the previous month.

Water companies rise on Ofwat determinations, Trustpilot slides

On London’s equity markets, water companies were in focus, with Pennon Group surging 10.62%, while Severn Trent and United Utilities Group rose by 3.74% and 2.63%, respectively.

The gains followed Ofwat’s draft determinations on the industry's five-year investment plans.

Both Severn Trent and Pennon were lauded by the regulator for their "outstanding" business plans.

Additionally, Severn Trent issued a trading statement, and Pennon announced a leadership change, with CFO Steve Buck stepping down for personal reasons, to be replaced by Laura Flowerdew.

“Pennon is a significant beneficiary of the outstanding business plan award given the de-rating we have seen in the stock versus peers and a view that this would not have been in market expectations,” noted RBC Capital Markets.

“Severn Trent outstanding also a positive, although arguably more expected given a view that SVT are one of the strongest names in the sector.”

Elsewhere, RS Group advanced 7.89% after the industrial maintenance, repair, and operation products firm maintained its outlook for trading conditions to stabilise over the current financial year, despite a slight dip in like-for-like sales in the first quarter.

Dr Martens gained 1.63% after the iconic bootmaker reaffirmed its annual guidance, indicating that trading since the beginning of the current financial year had met expectations.

On the downside, Trustpilot Group plummeted 7.14%, despite forecasting a 20% year-on-year increase in first-half bookings to $118m.

DCC saw a 1.41% decline after reporting only a "modest" improvement in first-quarter operating profit.

Moonpig Group dropped 3.22% following the sale of 35 million shares by a group of investors, raising around £61m through a placing facilitated by Citi, JPMorgan, and Jefferies.

Bytes Technology Group fell by 6.11% after the computer software reseller indicated it continued to “trade well” amidst a “competitive market environment”, showing good growth across key financial performance metrics for the first four months of the trading year.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,223.34 0.36%
FTSE 250 (MCX) 21,188.91 1.25%
techMARK (TASX) 4,826.28 0.80%

FTSE 100 - Risers

Severn Trent (SVT) 2,715.00p 3.74%
Rightmove (RMV) 559.80p 3.51%
CRH (CDI) (CRH) 6,092.00p 3.39%
easyJet (EZJ) 493.90p 3.26%
Schroders (SDR) 388.00p 2.97%
Persimmon (PSN) 1,484.00p 2.88%
Fresnillo (FRES) 625.00p 2.80%
Sainsbury (J) (SBRY) 268.00p 2.76%
United Utilities Group (UU.) 1,094.00p 2.63%
Kingfisher (KGF) 269.70p 2.59%

FTSE 100 - Fallers

Vodafone Group (VOD) 71.22p -1.68%
Relx plc (REL) 3,543.00p -1.45%
DCC (CDI) (DCC) 5,610.00p -1.41%
Admiral Group (ADM) 2,598.00p -0.99%
Darktrace (DARK) 582.80p -0.68%
Shell (SHEL) 2,815.00p -0.64%
BP (BP.) 451.80p -0.63%
M&G (MNG) 210.70p -0.57%
Anglo American (AAL) 2,394.00p -0.56%
Standard Chartered (STAN) 719.40p -0.28%

FTSE 250 - Risers

Pennon Group (PNN) 679.00p 9.69%
RS Group (RS1) 790.00p 9.65%
Indivior (INDV) 843.00p 8.08%
Crest Nicholson Holdings (CRST) 250.80p 6.18%
Diversified Energy Company (DEC) 1,174.00p 5.77%
Currys (CURY) 77.15p 5.18%
Pagegroup (PAGE) 424.60p 5.00%
Hays (HAS) 94.15p 4.96%
TI Fluid Systems (TIFS) 134.20p 4.84%
Jupiter Fund Management (JUP) 87.20p 4.81%

FTSE 250 - Fallers

Bytes Technology Group (BYIT) 492.00p -6.11%
Trustpilot Group (TRST) 222.50p -5.52%
Direct Line Insurance Group (DLG) 193.80p -2.96%
CMC Markets (CMCX) 323.00p -2.71%
North Atlantic Smaller Companies Inv Trust (NAS) 3,980.00p -2.22%
Zigup (ZIG) 423.00p -2.20%
Moonpig Group (MOON) 198.40p -1.78%
Paragon Banking Group (PAG) 748.50p -1.45%
Wood Group (John) (WG.) 205.00p -1.25%
Ascential (ASCL) 349.40p -1.24%