London close: Stocks rise as US inflation comes in cooler
London stocks closed above the waterline on Thursday, as investors digested a bigger-than-expected slowdown in inflation stateside, after a deluge of retail updates earlier in the day.
The FTSE 100 ended the session up 0.89% at 7,794.04, and the FTSE 250 was ahead 1.64% at 19,841.13.
Sterling was in a mixed state, meanwhile, last trading up 0.21% on the dollar at $1.2172, while it weakened 0.34% against the euro to change hands at €1.1251.
“European markets have continued to push higher after today’s US CPI report came in as expected, with the FTSE 100 pushing above 7,800 for the first time since May 2018, as it looks to close in on its record high of 7,900,” said CMC Markets chief market analyst Michael Hewson.
“The sharp fall in inflationary pressures in the US is helping to translate into weakness in UK gilt yields, with the prospect that lower inflation and lower rates will combine to create a faster decline, and thus diminish the longer-term economic damage to consumer wallets.”
In economic news, the cost of living in the United States slipped more than expected last month.
According to the US Department of Labor, the annual rate of headline consumer price inflation fell to 6.5% in December, from 7.1% for November and against consensus expectations for a print of 6.6%.
At the core level, which strips out volatile food and energy components, CPI was up 5.7% year-on-year, versus 6.0% in the month before and in line with economists' forecasts.
On a month-on-month basis, headline CPI dipped by 0.1% and core CPI was 0.3% higher - both in line with market forecasts.
“The December CPI is another small step in the right direction, but it doesn’t alter our forecast for the upcoming meeting of the Federal Open Market Committee where we expect them to hike the target range for the fed funds rate by 25-basis points,” said Oxford Economics’ chief US economist Ryan Sweet.
“This likely won’t be the final rate hike this cycle as the Fed is going to want concrete evidence that they have broken inflation, and that it is returning to their 2% objective.
“The response in financial markets and fed funds futures was fairly muted to the December CPI.”
Elsewhere, Americans filed unemployment claims at a decelerated clip in the seven days ended 7 January, hitting their lowest level in more than three months.
According to the Labor Department, weekly initial jobless claims fell by 1,000 to 205,000, well and truly short of the 215,000 figures expected on Wall Street, adding to recent evidence of a tight labour market.
It said the main increases were seen in California and New York.
The four-week moving average, which aims to strip out week-to-week volatility, fell by 1,750 to 212,500, while on a non-seasonally adjusted basis, initial claims rose by 60,799 to 339,286.
Secondary unemployment claims meanwhile fell by 63,000 to 1.63m over the week ended 31 December.
“The near-flat jobless claims print today is the product of favourable seasonals, again,” said Ian Shepherdson at Pantheon Macroeconomics.
“The surge in Challenger job cut announcements in recent months means that claims will rise across the first half of the year, at least, but predicting the exact timing of the lift-off is difficult, and in any event, the numbers from Thanksgiving through mid-Jan are even less reliable than usual.
“Seasonals can't cope with the holidays.”
Finally on data, inflation in China pushed higher last month according to official data released earlier, driven by rising food prices.
According to the National Bureau of Statistics, the consumer price index rose 1.8% year-on-year, in line with consensus and following a 1.6% increase in November.
Pork prices jumped 22.2% in December, although that is down from a peak of 51.8% in October.
Excluding food, CPI was unchanged at 1.1%.
Producer price inflation, meanwhile, decreased 0.7% year-on-year compared to 1.3% decline in November - economists had been expecting a fall of 0.1%.
On London’s equity markets, online fashion retailer Asos rocketed 20.09% despite reporting a slide in sales over the crucial festive trading period.
It said the UK had been hit by weak consumer sentiment, first in September and then again in December, which was further affected by disruption in the delivery market after Royal Mail workers carried out a series of strikes.
Neil Wilson, chief market analyst at Markets.com, said the shares were rallying "in the absence of a profit warning".
Meanwhile, broker Peel Hunt said that in the context of being the most shorted stock and weak expectations, the update was "relatively stable".
AJ Bell’s Russ Mould said investors were taking a positive view, "bidding up the shares in the belief that the new boss is swiftly taking action to sort the business out".
"Chief executive José Antonio Ramos Calamonte doesn’t want to go back to the old days where the key focus was sales growth,” Mould noted.
“His focus is now on profitable growth and generating good returns from the money invested in the business.”
Sticking with retail, Tesco reversed earlier losses to close up 0.94%, after the supermarket chain reiterated full-year profit guidance as it posted strong Christmas sales.
Marks and Spencer Group also pared losses to close up 1.32%, after posting a jump in sales over the holidays.
JD Sports Fashion gained for the second day in a row, rising 5.94% after surging on Wednesday.
The retailer had said it expected annual profits to be at the top end of expectations after revenues grew by more than a fifth over the Christmas period.
On the downside, Halfords Group tumbled 18.72% after the motoring and cycling products retailer cut its full-year profit guidance amid weakness in the consumer tyre market and labour market issues.
The company said it now expected underlying pre-tax profit for the 2023 period of between £50m and £60m, down from previous guidance of £65m to £75m.
Discount chain B&M European Value Retail lost 4.4%, as it traded without entitlement to the dividend.
Away from retail, housebuilder Persimmon jumped 8.33% after saying it delivered 14,868 new homes to customers in 2022, towards the top end of its guidance, but warning over the outlook for the new year.
British Gas owner Centrica advanced 3.79% after it lifted earnings guidance again, as volumes remained strong amid surging energy prices for consumers.
Premier Inn owner Whitbread also racked up solid gains, advancing 5.78% after it posted a rise in third-quarter sales, highlighting a strong performance in the UK and further progress in Germany.
Hilton Food Group surged 12.77% after saying full-year trading was in line with its expectations, hailing a "pleasing" performance in the run-up to Christmas.
In an update for the year ended 1 January, the packaged food business pointed to continued revenue growth versus a year earlier.
Pub operator Mitchells & Butlers was 4.92% stronger after reporting a rise in first-quarter sales as customers enjoyed their first Christmas free of Covid restrictions, although it warned of a challenging outlook for the hospitality sector.
The company said strong trading over the festive season helped boost like-for-like sales in the year to date to 10.4%, with total sales growth of 13.3%.
Sales in the five weeks to 7 January were up 23.9%.
In broker note action, Experian was down 1.11% and Ashtead Group fell 0.63%, after rating downgrades at RBC Capital Markets.
Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert, Abigail Townsend and Alexander Bueso.
Market Movers
FTSE 100 (UKX) 7,794.04 0.89%
FTSE 250 (MCX) 19,841.13 1.64%
techMARK (TASX) 4,511.20 0.60%
FTSE 100 - Risers
Persimmon (PSN) 1,404.50p 8.33%
Barratt Developments (BDEV) 451.20p 6.69%
M&G (MNG) 202.70p 6.24%
JD Sports Fashion (JD.) 159.70p 5.94%
Whitbread (WTB) 3,020.00p 5.78%
Vodafone Group (VOD) 92.05p 4.82%
Berkeley Group Holdings (The) (BKG) 4,371.00p 4.59%
Taylor Wimpey (TW.) 112.65p 4.40%
St James's Place (STJ) 1,243.00p 3.97%
International Consolidated Airlines Group SA (CDI) (IAG) 152.48p 3.94%
FTSE 100 - Fallers
B&M European Value Retail S.A. (DI) (BME) 432.00p -4.40%
Sage Group (SGE) 767.60p -1.97%
Beazley (BEZ) 655.50p -1.65%
AstraZeneca (AZN) 11,448.00p -1.60%
SSE (SSE) 1,670.00p -1.33%
Halma (HLMA) 2,106.00p -1.27%
Experian (EXPN) 2,858.00p -1.11%
3i Group (III) 1,411.00p -1.05%
Smith & Nephew (SN.) 1,149.00p -1.03%
Johnson Matthey (JMAT) 2,184.00p -0.95%
FTSE 250 - Risers
ASOS (ASC) 708.50p 20.90%
Hilton Food Group (HFG) 620.00p 12.77%
Volution Group (FAN) 412.50p 8.98%
TUI AG Reg Shs (DI) (TUI) 168.25p 8.48%
easyJet (EZJ) 418.20p 6.52%
Genuit Group (GEN) 333.00p 6.22%
Shaftesbury (SHB) 387.60p 5.90%
Vistry Group (VTY) 739.50p 5.79%
Redrow (RDW) 524.00p 5.35%
RHI Magnesita N.V. (DI) (RHIM) 2,462.00p 5.30%
FTSE 250 - Fallers
Synthomer (SYNT) 149.30p -2.48%
RIT Capital Partners (RCP) 2,025.00p -1.70%
Digital 9 Infrastructure NPV (DGI9) 87.60p -1.57%
CLS Holdings (CLI) 150.40p -1.57%
SDCL Energy Efficiency Income Trust (SEIT) 97.30p -1.22%
Syncona Limited NPV (SYNC) 168.40p -1.06%
Primary Health Properties (PHP) 115.00p -1.03%
Baltic Classifieds Group (BCG) 144.60p -0.96%
Playtech (PTEC) 545.00p -0.82%
Greencoat UK Wind (UKW) 149.10p -0.60%