London close: Stocks close higher after UK and US inflation

Oil prices were volatile after reaching a 2016 high on Monday. At 1632 BST Brent crude rose 0.38% to $49.16 per barrel and West Texas Intermediate increased 0.81% to $48.11 per barrel.

Global supply disruptions have helped soothe the crude glut that has been blamed for pushing prices lower. Goldman Sachs on Sunday said the market had finished almost two years of oversupply and moved to a deficit following global production disruptions.

Meanwhile, UK inflation came in worse than expected. The Office for National Statistics said the consumer price index rose 0.3% in the year to April, down from 0.5% in March. Analysts had predicted 0.4% year-on-year growth.

The slowdown was driven by declines in air fares and prices for clothing, vehicles and social housing rent.

Between April and March inflation also eased to 0.1% from the previous 0.4% month-on-month gain, missing forecasts of 0.3%.

The Bank of England, which is targeting 2%, has said that it is reacting more cautiously to UK news and data ahead of the European Union referendum on 23 June.

“On the assumption that the UK votes to stay in the EU, we expect the Bank of England’s eventual next move will be to raise interest rates from 0.50% to 0.75% – but not until May 2017,” said Howard Archer, chief UK and European economist at IHS Global Insight.

Separately, the ONS revealed UK house price growth accelerated to 9.0% in March compared to the previous year, mostly due to the surge in demand for second homes ahead of an increase in buy-to-let stamp duty. It marked a 12-month high and a pick-up in growth from the previous 7.60%.

Data from the Council of Mortgage Lenders British showed UK house purchase lending spiked 60% higher in March on a monthly and annual basis as investors rushed to beat the buy-to-let stamp duty increase in April.

In the US, inflation rose 1.1% year-on-year in April compared to 0.9% in March, the Labor Department said, in line with estimates. On a month-on-month comparison inflation rose 0.4% in April following a 0.1% increase in March, better than the 0.3% expected.

“Today’s CPI figures provide powerful evidence that the Fed’s accommodative monetary policy, combined with a broadly neutral fiscal policy, have had the desired effect on the US economy,” said Ranko Berich, head of market analysis at Monex Europe.

“If this type of data holds up it’s almost certain that Esther George won’t be the only FOMC member voting for a hike in June. Today’s figures mean that Wednesday’s FOMC minutes will be picked apart with a fine tooth comb for indications that the Fed is gearing up to raise rates again.”

The US also saw the release of data on housing starts from the Commerce Department which showed a 6.6% increase in April, ahead of estimates for a 3.3% gain. Housing starts had fallen 8.8% in March.

US industrial production grew 0.7% in April, more than the 0.3% rise expected and following a 0.9% decrease in March, the Federal Reserve revealed. Manufacturing output was up 0.3%, in line with forecasts and following a 0.3% dip in March.

On the company front, shares in Taylor Wimpey jumped after the housebuilder announced enhancements to its dividend policy and raised its guidance on operating profit margins between 2016 and 2018.

Vodafone gained after the company’s organic sales returned to growth and beat expectations in the full year after a strong performance in the fourth quarter, hiking the final dividend 2%.

Land Securities advanced after it posted what it described as “strong” preliminary results on Tuesday, with asset values, revenue and earnings all increasing in the 12 months to 31 March.

Inmarsat rallied thanks in part to a note from Credit Suisse that reiterated its 'outperform' rating on the satellite group while downgrading rival Eutelsat to 'neutral' after its substantial profit warning.

Healthcare company BTG edged higher as it more than doubled full year pre-tax profits to £57.5m on the back of a 22% jump in revenues to £447.5m.

Halma’s shares slumped after UBS downgraded the stock to ‘sell’ from ‘neutral’.

Market Movers

FTSE 100 (UKX) 6,160.90 0.15%
FTSE 250 (MCX) 16,845.08 0.87%
techMARK (TASX) 3,073.41 0.69%

FTSE 100 - Risers

Ashtead Group (AHT) 927.50p 5.82%
Taylor Wimpey (TW.) 193.50p 4.65%
DCC (DCC) 6,385.00p 3.82%
Inmarsat (ISAT) 777.00p 3.81%
Anglo American (AAL) 628.70p 3.15%
BHP Billiton (BLT) 861.70p 2.58%
Berkeley Group Holdings (The) (BKG) 3,059.00p 2.48%
Barratt Developments (BDEV) 551.00p 2.42%
Glencore (GLEN) 136.75p 2.36%
Land Securities Group (LAND) 1,162.00p 2.02%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 1,027.00p -2.47%
Associated British Foods (ABF) 2,980.00p -2.33%
Diageo (DGE) 1,851.50p -1.99%
Unilever (ULVR) 3,106.50p -1.79%
Imperial Brands (IMB) 3,713.50p -1.66%
Paddy Power Betfair (PPB) 8,875.00p -1.50%
Tesco (TSCO) 164.25p -1.47%
British American Tobacco (BATS) 4,175.00p -1.42%
Sainsbury (J) (SBRY) 253.30p -1.21%
BAE Systems (BA.) 484.80p -1.08%

FTSE 250 - Risers

Lookers (LOOK) 139.90p 6.23%
Aggreko (AGK) 1,089.00p 5.63%
Weir Group (WEIR) 1,209.00p 5.50%
Polymetal International (POLY) 812.50p 4.50%
Ladbrokes (LAD) 119.70p 3.82%
BTG (BTG) 608.50p 3.75%
Kaz Minerals (KAZ) 159.40p 3.51%
Restaurant Group (RTN) 314.40p 3.46%
Drax Group (DRX) 301.60p 3.11%
Bovis Homes Group (BVS) 925.50p 3.06%

FTSE 250 - Fallers

TalkTalk Telecom Group (TALK) 248.20p -3.42%
Halma (HLMA) 892.00p -2.89%
ICAP (IAP) 441.90p -2.62%
Hikma Pharmaceuticals (HIK) 2,260.00p -1.74%
Shawbrook Group (SHAW) 262.00p -1.69%
Ocado Group (OCDO) 264.80p -1.41%
Interserve (IRV) 310.40p -1.27%
Britvic (BVIC) 711.00p -1.18%
Greencore Group (GNC) 382.10p -1.14%
Wood Group (John) (WG.) 624.50p -1.11%