London close: Stocks finish green as US inflation sates investors
London stocks held onto their gains on Wednesday, underpinned by deal news, as investors digested the latest US inflation reading.
The FTSE 100 ended the session up 0.83% at 7,220.14, and the FTSE 250 was 0.78% firmer at 23,756.83.
Sterling was stronger on the dollar, last trading up 0.16% at $1.3865, but it stood still against the euro at €1.1812.
“It’s been another day of decent gains for markets in Europe, with new records for the FTSE 250, and the FTSE 100 also making a new 18-month high on another varied day for earnings,” said CMC Markets chief market analyst Michael Hewson.
“Amongst the outperformers has been Spirax-Sarco Engineering who have seen a decent jump in first half revenues to £643.7m, due to increased demand for its steam products.”
IG chief market analyst Chris Beauchamp, meanwhile, said that slower growth in US prices gave the “all clear” for equities to move higher in the afternoon, after a cautious start to the day.
“After four months of strong readings there was plenty of nervousness going into the release, given the potential implications for Fed policy,” he said.
“But a rise of 0.5% month-on-month is well below recent readings and will allay fears that inflation will turn out to be not so ‘transitional’ after all.
“Nonetheless, concerns about higher prices haven’t gone away entirely, and even at 0.5% inflation is still running at levels that would be considered strong back in pre-Covid times, so today’s reading won’t bring the discussion about policy changes to an end.”
For now, Beauchamp said, traders were content to push indices higher in the expectation that no change to quantitative easing or interest rates would allow the economic recovery to continue at a strong clip.
The cost of living across the pond edged past forecasts in July, as food and energy prices continued advancing at a rapid clip.
According to the Department of Labor, the consumer price index jumped 0.5% month-on-month, keeping the annual rate of gains at 5.4%, beating consensus expectations for 5.3%, and coming in the same as in June.
Food and energy prices both increased by 0.7% on the month, while at the core level, CPI was up by 0.3% on the month and 4.3% on the year, in line with what economists had pencilled in.
Kathy Bostjancic at Oxford Economics noted that the moderation in the monthly rate of price gains allowed inflation to stabilise in annual terms.
She said June marked the peak in the annual rate of inflation, as the strong base effects were subsiding and wholesale prices for used cars and trucks had moderated "greatly".
“That said, price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated and sticky as supply and demand imbalances are only gradually resolved,” Bostjancic said.
“While we share the Fed's view that this isn't the start of an upward wage-price spiral, we look for inflation to remain persistently above 2.0% through 2022.”
In equity markets, Spirax-Sarco leapt 4.23% after lifting its dividend by 15% as it reported a 39% increase in first-half adjusted pre-tax profit.
Meggitt shot up 16.08% on the FTSE 250, after the defence and aerospace engineer said it had received an unsolicited takeover approach from US aerospace manufacturer TransDigm at 900p a share in cash.
That came after the company announced last week that it had agreed to be bought by US rival Parker-Hannifin for £6.3bn, or 800p a share.
Cybersecurity firm Avast rallied 3.1% after it agreed to be bought by US rival NortonLifeLock in a £6.2bn deal and posted a jump in first-half adjusted earnings and revenue.
Prudential gained 2.62% after it said first-half new business profits rose 25% and adjusted operating profit from continuing operations was 19% higher, but struck a cautious note over the short-term outlook due to Covid uncertainty.
Admiral Group ticked 3.91% higher, with shareholders set to cash in as the company paid an increased interim dividend and extra payouts after the sale of its Penguin Portals business.
The insurer also posted a 76% increase in half-year pre-tax profit from continuing operations.
Transport infrastructure group Hill & Smith rocketed 9.03% after it said first-half profit and revenue rose amid a good recovery in trading across all of its divisions, and upgraded its outlook for the year.
Promotional products supplier 4Imprint was in the black by 7.34% after it reinstated its dividend and highlighted a "robust" recovery in demand in the first half.
On the downside, Quilter slumped 7.19% despite hailing "robust" interim results, as it set aside more money to cover compensation relating to the Lighthouse DB transfer review.
Phoenix Group was in the red by 2.22%, even after it reported a rise in first-half operating profit and a more than doubling of its cash generation.
Market Movers
FTSE 100 (UKX) 7,220.14 0.83%
FTSE 250 (MCX) 23,756.83 0.78%
techMARK (TASX) 4,735.44 1.53%
FTSE 100 - Risers
Spirax-Sarco Engineering (SPX) 15,765.00p 4.23%
Admiral Group (ADM) 3,584.00p 3.91%
JD Sports Fashion (JD.) 972.80p 3.51%
Glencore (GLEN) 341.35p 3.30%
London Stock Exchange Group (LSEG) 8,098.00p 3.16%
Avast (AVST) 586.00p 3.10%
Melrose Industries (MRO) 174.25p 3.09%
Sainsbury (J) (SBRY) 302.50p 2.93%
CRH (CDI) (CRH) 3,820.00p 2.72%
Prudential (PRU) 1,489.50p 2.62%
FTSE 100 - Fallers
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,272.00p -4.01%
Phoenix Group Holdings (PHNX) 684.60p -2.20%
Rio Tinto (RIO) 6,094.00p -1.02%
Scottish Mortgage Inv Trust (SMT) 1,355.50p -0.95%
B&M European Value Retail S.A. (DI) (BME) 556.20p -0.86%
Whitbread (WTB) 3,180.00p -0.78%
Burberry Group (BRBY) 2,130.00p -0.75%
Rightmove (RMV) 703.80p -0.48%
National Grid (NG.) 947.80p -0.39%
Taylor Wimpey (TW.) 177.85p -0.36%
FTSE 250 - Risers
Meggitt (MGGT) 830.00p 16.08%
Hill & Smith Holdings (HILS) 1,812.00p 9.03%
4Imprint Group (FOUR) 3,070.00p 7.34%
Morgan Sindall Group (MGNS) 2,400.00p 5.22%
Cairn Energy (CNE) 177.80p 4.65%
HGCapital Trust (HGT) 408.00p 4.35%
SSP Group (SSPG) 260.50p 3.78%
Apax Global Alpha Limited (APAX) 217.50p 3.57%
Capita (CPI) 47.41p 3.29%
IP Group (IPO) 130.60p 3.16%
FTSE 250 - Fallers
Quilter (QLT) 156.75p -7.19%
IWG (IWG) 310.00p -5.49%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,272.00p -4.01%
Cineworld Group (CINE) 61.26p -3.22%
Watches of Switzerland Group (WOSG) 1,022.00p -3.21%
Ferrexpo (FXPO) 439.20p -2.62%
Moonpig Group (MOON) 365.40p -2.56%
Convatec Group (CTEC) 224.30p -2.48%
Edinburgh Worldwide Inv Trust (EWI) 321.50p -2.13%
Baillie Gifford US Growth Trust (USA) 345.50p -1.99%