London close: Stocks firmer as US inflation blasts past forecasts

The FTSE 100 ended the session up 0.91% at 7,340.15, and the FTSE 250 was ahead 0.28% at 23,433.25.

Sterling was going in different directions, meanwhile, last trading 0.7% weaker against the dollar at $1.3462, as it gained 0.03% on the euro to €1.1697.

“Spare a thought for ‘Team Transitory’ today, who will be contemplating the complete breakdown of their thesis today as US prices surge by their fastest amount since 1990,” said IG chief market analyst Chris Beauchamp.

“It might yet be a passing phase in inflation, but it is becoming increasingly tough for the Fed to argue that prices will start to come back down over the next few months.

“Dollar strength accounts for at least part of Europe’s outperformance against US stocks today, but even here the dip buyers have tiptoed in to try and exploit some brief weakness on Wall Street.”

Beauchamp said stock markets still seemed to be searching for a reason to move higher, and at the moment appeared to be pinning their hopes on the US infrastructure bill going ahead.

“This boost of fiscal stimulus would help to lessen any worries about a tightening of monetary policy, and could help stocks to navigate the mid-month dip that often occurs during November.”

Indeed, the cost of living in the US rose more quickly than expected in October on the back of further spikes in energy and food prices, fresh inflation data revealed earlier in the afternoon.

According to the US Department of Labor, the headline consumer price index increased at a seasonally-adjusted month-on-month pace of 0.9%, which pushed the year-on-year rate up to 6.2%.

Economists had pencilled in a smaller 0.6% jump to 6.2%.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said prices were being driven higher by rents, with the weighted average of primary and owners' equivalent rent jumping by 0.44%, in line with last month’s biggest increase in 15 years.

“We have no problem believing that supply constraints will ease markedly over the next year and do not require a monetary policy response, but the Fed is now putting a great deal of faith in the idea the wages soon will be constrained by rebounding participation, and that stronger productivity growth will hold down unit labor costs growth too,” Shepherdson said.

“This is entirely reasonable, but not certain.”

Initial jobless claims, meanwhile, hit another fresh pandemic-era low stateside, with labour shortages and efforts to hire and retain staff putting a cap on the rate of firings and separations across the US.

According to the Labor Department, which released its jobless claims report a day earlier than usual due to the Veterans Day holiday on Thursday, initial unemployment claims fell to 267,000 in the week ended 5 November, from a revised print of 271,000 for the week before.

Investors were earlier mulling the latest inflation data out of China, which showed that factory gate prices surged to a 26-year high in October amid a power crisis.

According to figures released by the National Bureau of Statistics, producer price inflation rose from 10.7% year-on-year in September to 13.5%, versus expectations for 12.3%.

Meanwhile, consumer price inflation rose to a 13-month high of 1.5% in October from 0.7% the month before. This was due partly to a rise in fuel price inflation to a new high of 31.4% from 22.8%.

Julian Evans-Pritchard, senior China economist at Capital Economics, said the jump in producer price inflation largely reflects temporary disruption in a handful of industries from energy shortages, which were already easing.

"There are still few signs of wider price pressures and we think PPI inflation is likely to drop back in the coming months while CPI inflation looks set to remain muted for the foreseeable future," he said.

"We continue to think that consumer price inflation will remain below 2% in the coming quarters and that inflation is unlikely to be a major constraint on the PBoC’s ability to loosen monetary policy."

In equity markets, ITV rocketed 15.14% after the broadcaster said it expected advertising revenue to hit new records this year, as the economy opened up after the impact of the Covid pandemic.

High street stalwart Marks & Spencer surged 16.48% after it said annual profits would be ahead of expectations as interim earnings rose above pre-pandemic levels.

Retail peers Kingfisher, Next and Primark owner Associated British Foods followed Marks’ lead, rising 2.93%, 3.07% and 2.54%, respectively.

Polymetal added 2.99% and Fresnillo shone by 3.54%, as gold prices advanced.

“Gold has blown past resistance and the path to $1,875 is clear,” quipped Neil Wilson, chief market analyst at Markets.com.

On the downside, pub chain J D Wetherspoon lost 7.24% after it reported a drop in sales versus pre-pandemic trading, as its older, more cautious customers made fewer visits to its pubs.

Aveva fell 3.59% as the software group reported a widening of its first-half losses.

Indivior was under the cosh, sliding 5.76% after US alternative asset management firm Scopia Capital sold 20m share in the opioid addiction treatment maker in a placing.

Babcock International was knocked 0.34% lower by a downgrade to ‘equalweight’ at Barclays.

Market Movers

FTSE 100 (UKX) 7,340.15 0.91%
FTSE 250 (MCX) 23,433.25 0.28%
techMARK (TASX) 4,636.91 0.26%

FTSE 100 - Risers

ITV (ITV) 125.85p 15.14%
Pearson (PSON) 634.60p 3.56%
Fresnillo (FRES) 963.20p 3.54%
Smiths Group (SMIN) 1,452.00p 3.46%
B&M European Value Retail S.A. (DI) (BME) 643.80p 3.07%
Next (NXT) 8,262.00p 3.07%
JD Sports Fashion (JD.) 1,144.50p 3.05%
Polymetal International (POLY) 1,449.00p 2.99%
Kingfisher (KGF) 340.30p 2.93%
SSE (SSE) 1,659.00p 2.72%

FTSE 100 - Fallers

Aveva Group (AVV) 3,384.00p -3.59%
Darktrace (DARK) 599.50p -1.72%
InterContinental Hotels Group (IHG) 5,154.00p -1.26%
Burberry Group (BRBY) 1,967.00p -1.01%
Smurfit Kappa Group (CDI) (SKG) 3,858.00p -0.85%
Avast (AVST) 561.20p -0.67%
Scottish Mortgage Inv Trust (SMT) 1,505.50p -0.63%
Hikma Pharmaceuticals (HIK) 2,378.00p -0.59%
Royal Mail (RMG) 425.60p -0.49%
Spirax-Sarco Engineering (SPX) 16,275.00p -0.46%

FTSE 250 - Risers

Marks & Spencer Group (MKS) 226.50p 16.48%
Petropavlovsk (POG) 23.58p 7.45%
Centamin (DI) (CEY) 99.84p 5.70%
Airtel Africa (AAF) 131.50p 5.03%
Hochschild Mining (HOC) 161.70p 3.45%
Endeavour Mining (EDV) 2,030.00p 3.31%
AO World (AO.) 132.50p 3.19%
Moonpig Group (MOON) 339.20p 3.16%
TP Icap Group (TCAP) 140.50p 3.14%
Baltic Classifieds Group (BCG) 206.00p 3.00%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 954.50p -7.24%
Indivior (INDV) 245.60p -5.76%
Watches of Switzerland Group (WOSG) 1,250.00p -4.14%
Restaurant Group (RTN) 80.40p -3.13%
888 Holdings (888) 362.00p -3.10%
PureTech Health (PRTC) 342.50p -2.97%
CLS Holdings (CLI) 216.00p -2.92%
Hammerson (HMSO) 33.01p -2.84%
Mitchells & Butlers (MAB) 240.80p -2.75%
Grafton Group Ut (CDI) (GFTU) 1,295.00p -2.70%