London midday: Stocks edge higher as inflation hits two-year high

Stocks in London were edging higher by midday as investors digested news that UK inflation hit a two-year high in November and looked ahead to a policy announcement from the Federal Reserve.

The FTSE 100 was up 0.5% to 6,927.36. Meanwhile, oil prices were higher as the International Energy Agency said in its monthly report that the agreement by OPEC to cut production by 1.2m barrels a day and by non-OPEC nations to cut by 558,000 barrels should help balance supply and demand by the first half of 2017.

West Texas Intermediate was up 0.8% to $53.23 a barrel and Brent crude was 0.9% higher at $56.20.

On the macroeconomic front, figures from the Office for National Statistics revealed that UK inflation increased more sharply than expected in November to the highest level in over two years.

Consumer price inflation rose to 1.2% in the year to November, following a surprise fall to 0.9% in October from 1% in September.

This was just above the consensus forecast among economists of 1.1% and the highest rate of CPI since October 2014.

Month-on-month, CPI rose 0.2% in November, as expected, after a 0.1% rise the month before.

Core inflation, which excludes more volatile goods like fuel and food, rose back up to 1.4% in November after dipping to 1.2% in October from 1.5% in September.

"While it will take some time before we see the full effects of sterling’s depreciation on consumer prices, the breakdown showed that components that typically respond more quickly to exchange rate movements, such as petrol and food prices, were a major upward influence on inflation," said Ruth Gregory at Capital Economics.

In corporate news, infrastructure construction group Balfour Beatty was firmer after saying it expects to finish the year with a positive cash balance as it completes the first phase of chief executive Leo Quinn's two-year turnaround process.

UBM advanced after agreeing to buy privately-owned Asian exhibitions company Allworld Exhibitions for a cash consideration that values the business at $485m on a debt and cash free basis.

Old Mutual nudged up after saying its asset management business will float on the London Stock Exchange with an offering of 13m shares and the equity raised will be used for “general corporate purposes”.

Housebuilder Bellway gained as it reported a 7% jump in reservations in the 18-week period to 4 December and said it expects housing completions for the year to the end of July 2017 to rise by 5%.

On the downside, cyber security expert NCC Group tumbled after issuing a profit warning, while Carpetright slid after posting a 42% slump in pre-tax profit for the 26 weeks ended 29 October amid uneven consumer demand and as it took a hit from the weakening of the pound versus the euro.

More broadly, investors were eyeing the latest policy announcement from the Federal Reserve on Wednesday, amid expectations of a 25 basis points rate hike.

Societe Generale said: “After months of speculation about whether or not the Fed would raise rates this year, there is now little prospect of fanfare as markets have fully priced in a hike. We expect few tweaks to the communiqué and virtually no changes to the SEP. We will see what Yellen has to say in the press conference, but anyone expecting that she will opine on potential fiscal policies from the new administration may be disappointed.”

Market Movers

FTSE 100 (UKX) 6,927.36 0.54%
FTSE 250 (MCX) 17,657.33 0.09%
techMARK (TASX) 3,272.47 0.63%

FTSE 100 - Risers

ITV (ITV) 191.80p 3.56%
3i Group (III) 695.00p 2.89%
International Consolidated Airlines Group SA (CDI) (IAG) 443.30p 2.50%
Burberry Group (BRBY) 1,478.00p 2.28%
Compass Group (CPG) 1,383.00p 2.22%
Shire Plc (SHP) 4,402.00p 2.02%
Rolls-Royce Holdings (RR.) 664.00p 2.00%
BT Group (BT.A) 353.55p 1.98%
GKN (GKN) 317.50p 1.73%
Paddy Power Betfair (PPB) 8,500.00p 1.67%

FTSE 100 - Fallers

Tesco (TSCO) 206.45p -3.01%
Antofagasta (ANTO) 753.00p -2.78%
Ashtead Group (AHT) 1,604.00p -2.43%
Coca-Cola HBC AG (CDI) (CCH) 1,622.00p -2.41%
Fresnillo (FRES) 1,122.00p -2.01%
Randgold Resources Ltd. (RRS) 5,710.00p -1.21%
BHP Billiton (BLT) 1,385.00p -1.11%
Standard Life (SL.) 357.00p -0.97%
Hargreaves Lansdown (HL.) 1,210.00p -0.90%
Rio Tinto (RIO) 3,216.00p -0.89%

FTSE 250 - Risers

IP Group (IPO) 163.00p 5.03%
Greencore Group (GNC) 245.30p 4.83%
Inmarsat (ISAT) 742.00p 3.78%
OneSavings Bank (OSB) 349.10p 3.38%
Softcat (SCT) 307.40p 2.84%
Dunelm Group (DNLM) 795.50p 2.58%
JD Sports Fashion (JD.) 333.80p 2.55%
Drax Group (DRX) 315.60p 2.47%
Brown (N.) Group (BWNG) 209.60p 2.44%
Mitchells & Butlers (MAB) 235.40p 2.44%

FTSE 250 - Fallers

Paysafe Group (PAYS) 249.60p -32.69%
NCC Group (NCC) 190.80p -6.79%
Hunting (HTG) 588.50p -6.66%
Evraz (EVR) 259.30p -5.02%
Centamin (DI) (CEY) 126.80p -2.84%
Acacia Mining (ACA) 385.30p -2.55%
Restaurant Group (RTN) 320.80p -2.49%
Petra Diamonds Ltd.(DI) (PDL) 160.00p -2.32%
Kaz Minerals (KAZ) 404.40p -2.25%
Rotork (ROR) 245.40p -2.19%