London close: FTSE ends on high note after UK and US inflation improves

UK inflation returned in November with a 0.1% rise compared to a year ago, as expected by analysts, following a 0.1% decline in October, the Office for National Statistics revealed.

On month-on-month comparison, the consumer price index came in at 0.0% in November, better than the 0.1% drop that was forecast but worse than the previous month's 0.1%.

Howard Archer, chief UK and European economist at IHS Global Insight, said he saw CPI reaching 1% in the third quarter of 2016 before rising to 1.5% by end of 2016 and 2% around mid-2017.

"We maintain the view that the Bank of England is more likely than not to raise interest rates by mid-2016," he said, predicting a move in May. "However, we doubt interest rates will end 2016 any higher than 1% - and it is far from inconceivable that the Bank of England may only raise interest rates once to 0.75% during next year.”

The Bank of England is targeting 2% inflation.

In the US, inflation rose 0.5% in November from a year ago, matching analysts' estimates and marking an improvement from the previous month's 0.2% increase, according to the Bureau of Labor Statistics. However, CPI fell to 0% in November on a month-on-month comparison, after a 0.2% rise in October, meeting forecasts.

James Hughes, chief market analyst at GKFX, said the improvement in year-on-year inflation paves the way for the Federal Reserve to raise interest rates on Wednesday when the central bank wraps up its two-day policy meeting.

“As far as the inflation story alone goes, we must wait for the Core CPE reading before taking stock of the full picture, but today was all about not upsetting the Fed’s preparations, and it seems we have come through unscathed,” he said.

In other US data, sentiment among US housebuilders remained fairly flat in December, according to the National Association of Home Builders/Wells Fargo. The housing market index nudged down one point to 61, a touch below estimates for a reading of 62 but comfortably above the 50 threshold that indicates improvement.

The Empire State general business conditions index, which measures manufacturing conditions in the New York area, rose to a reading of -4.6 in December from -10.7, beating the -7 estimate.

Meanwhile, the ONS revealed UK house prices rose 7% in the year to October, up from 6.1% in the year to September. Average house prices reached £300,000 in England, £174,000 in Wales, £196,000 in Scotland and £158,000 in Northern Ireland.

In the commodities sector, oil recovered ground with Brent crude rising 1.6% to $38.56 per barrel and West Texas Intermediate increasing 2.1% to $37.09 per barrel at 1636 GMT. Moody’s cut its oil price estimates due to the threat of prolonged oversupply, hacking its 2016 Brent assumption to $43 from $53, with West Texas Intermediate lowered to $40 from $48.

Gold and copper prices declined 0.33% and 2.7%, respectively, while silver rose 0.15% on the Comex.

Among corporate stocks, Old Mutual continued to rebound after last week's losses due to political issues in South Africa. The country’s president unexpectedly sacked finance minister Nhlanhla Nene, replacing him with relatively unknown David van Rooyen.

Coca-Cola HBC AG rallied as the bottling company revealed it had purchased 100,000 of its shares for an average price of 1,433.66p on 12 December and cancelled them.

Supermarkets rose after the latest Kantar Worldpanel data. Sainsbury’s continued to thwart its rivals in recent weeks, increased sales and grew its market share as Tesco, Asda and Morrisons all saw sales fall.

Anglo American declined after JP Morgan slashed its price target on the company from 450p to 265p.

Glencore jumped after JPMorgan upgraded the stock to ‘overweight’ from ‘neutral’ with an unchanged target price of 160p.

Tullow Oil climbed after saying it discovered 102 metres of net oil pay in two columns at its Etom-2 well in Northern Kenya.

Serco was on the back foot after doing a U-turn on the sale of its Environmental Services and Leisure businesses.

Aveva Group plunged on news it had terminated takeover talks with French suitor Schneider Electric after the pair were unable to reach agreement.

Market Movers

FTSE 100 (UKX) 6,020.70 2.50%
FTSE 250 (MCX) 17,005.56 1.39%
techMARK (TASX) 3,134.63 1.38%

FTSE 100 - Risers

Schroders (SDR) 2,842.00p 6.12%
Berkeley Group Holdings (The) (BKG) 3,725.00p 5.79%
Old Mutual (OML) 166.20p 5.32%
Coca-Cola HBC AG (CDI) (CCH) 1,489.00p 5.30%
Sainsbury (J) (SBRY) 249.10p 5.15%
Morrison (Wm) Supermarkets (MRW) 147.20p 4.99%
St James's Place (STJ) 970.50p 4.69%
London Stock Exchange Group (LSE) 2,601.00p 4.63%
GKN (GKN) 293.00p 4.49%
Tesco (TSCO) 149.15p 4.26%

FTSE 100 - Fallers

Anglo American (AAL) 271.75p -3.22%
Fresnillo (FRES) 659.00p -0.90%
Randgold Resources Ltd. (RRS) 4,024.00p -0.45%
Capita (CPI) 1,146.00p 0.09%
Merlin Entertainments (MERL) 436.40p 0.25%
Antofagasta (ANTO) 414.00p 0.41%
CRH (CRH) 1,885.00p 0.53%
Centrica (CNA) 209.30p 0.58%
SABMiller (SAB) 4,030.00p 0.62%
Rolls-Royce Holdings (RR.) 541.00p 0.65%

FTSE 250 - Risers

Circassia Pharmaceuticals (CIR) 296.70p 7.70%
BTG (BTG) 666.00p 6.82%
AA (AA.) 285.70p 5.97%
Evraz (EVR) 62.25p 5.96%
UBM (UBM) 500.00p 5.69%
Petrofac Ltd. (PFC) 807.00p 5.63%
Tullow Oil (TLW) 160.00p 5.19%
Henderson Group (HGG) 290.40p 4.65%
Petra Diamonds Ltd.(DI) (PDL) 68.20p 4.52%
RPC Group (RPC) 817.50p 4.47%

FTSE 250 - Fallers

Aveva Group (AVV) 1,550.00p -28.44%
Supergroup (SGP) 1,519.00p -6.18%
Home Retail Group (HOME) 96.65p -5.98%
Foxtons Group (FOXT) 179.30p -3.86%
Paragon Group Of Companies (PAG) 344.80p -3.71%
PayPoint (PAY) 921.50p -2.85%
Domino's Pizza Group (DOM) 969.00p -2.76%
Keller Group (KLR) 796.00p -2.57%
Virgin Money Holdings (UK) (VM.) 371.60p -2.26%
Halfords Group (HFD) 336.30p -2.01%