London midday: Stocks rise as UK inflation reaches 22-month high

London stocks advanced on Tuesday as official data showed UK inflation rose to its highest level in almost two years.

The UK consumer price index increased an annualised 1.0% in September following a 0.6% gain in August, according to the Office for National Statistics. Economists had forecast a 0.9% rise.

The pick-up in inflation was driven by clothing and fuel prices.

On a month-on-month comparison, CPI rose 0.2% in September, in line with estimates and after a 0.3% rise in August.

Core inflation jumped a year-on-year 1.5% last month after a 1.3% increase in August, beating forecasts for a 1.4% rise.

Bank of England Governor Mark Carney last week warned that inflation will rise as weaker post-Brexit pound makes import costs more expensive.

"While the ONS found no direct evidence that the pound's fall has fed through to higher inflation, the link is clear from business surveys,” said Chris Williamson, chief economist at IHS Markit.

“The IHS Markit PMI surveys found companies' costs to have risen at the fastest rate for just over five years in September, with many firms blaming higher import costs resulting from the steep drop in the value of the pound, especially against the US dollar and euro.”

The pound rose 0.88% against the dollar to $1.2290 at 1149 BST.

The attention now turns to US inflation figures at 1330 BST with analysts expecting annualised growth of 1.5% in September after a 1.1% rise in August, which could fuel speculation of an interest rate hike by the Federal Reserve this year. The Fed is targeting 2% inflation.

On the company front, luxury retailer Burberry slumped after it said like-for-like sales improved in the second quarter but for the full year its expected benefit from currency movements is not as big as analyst forecasts.

Bookmaker William Hill was in the black despite being forced to withdraw from merger talks with Canadian online poker giant Amaya following objections from its major shareholders.

FTSE 250 housebuilder Bellway rallied after reporting a rise in full-year profit as it lifted its dividend by 40% and said demand has remained solid despite the Brexit vote.

Vodafone was higher as it said it has partnered with Iran’s HiWeb to provide telecoms infrastructure and internet of things services which would expand its presence in the country.

Moneysupermarket gained as Numis initiated its coverage of the stock with an ‘add’ rating and target price of 325p.

Market Movers

FTSE 100 (UKX) 7,013.06 0.94%
FTSE 250 (MCX) 17,982.84 1.07%
techMARK (TASX) 3,538.70 0.60%

FTSE 100 - Risers

Next (NXT) 4,683.00p 3.97%
easyJet (EZJ) 904.50p 3.55%
Randgold Resources Ltd. (RRS) 7,050.00p 3.37%
Marks & Spencer Group (MKS) 329.50p 3.00%
Fresnillo (FRES) 1,656.00p 2.99%
Royal Bank of Scotland Group (RBS) 175.10p 2.76%
Glencore (GLEN) 236.15p 2.72%
Polymetal International (POLY) 873.00p 2.71%
Barclays (BARC) 174.05p 2.65%
Informa (INF) 678.50p 2.65%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,399.00p -7.47%
Pearson (PSON) 734.50p -3.67%
Rolls-Royce Holdings (RR.) 763.50p -1.29%
Intertek Group (ITRK) 3,563.00p -0.70%
Hikma Pharmaceuticals (HIK) 1,995.00p -0.25%
GKN (GKN) 328.40p -0.18%
Worldpay Group (WI) (WPG) 288.60p -0.14%
Sky (SKY) 836.50p -0.12%
Paddy Power Betfair (PPB) 8,690.00p -0.11%
Hargreaves Lansdown (HL.) 1,154.00p -0.09%

FTSE 250 - Risers

Hochschild Mining (HOC) 271.30p 5.98%
Aggreko (AGK) 961.00p 4.80%
Halfords Group (HFD) 344.20p 4.62%
Restaurant Group (RTN) 369.40p 4.53%
Thomas Cook Group (TCG) 70.00p 4.48%
CMC Markets (CMCX) 203.40p 4.31%
IP Group (IPO) 152.90p 3.80%
Domino's Pizza Group (DOM) 330.60p 3.51%
Moneysupermarket.com Group (MONY) 282.90p 3.47%
Tullow Oil (TLW) 287.30p 3.46%

FTSE 250 - Fallers

Senior (SNR) 203.90p -2.39%
Vectura Group (VEC) 136.30p -1.52%
Daejan Holdings (DJAN) 5,665.00p -1.31%
Inmarsat (ISAT) 698.00p -0.85%
Scottish Inv Trust (SCIN) 732.00p -0.61%
Meggitt (MGGT) 444.40p -0.54%
TalkTalk Telecom Group (TALK) 211.40p -0.52%
Cobham (COB) 161.50p -0.31%
IG Group Holdings (IGG) 834.00p -0.30%
Grafton Group Units (GFTU) 523.00p -0.29%