London close: Stocks up as US inflation exceeds forecasts

The US consumer price index for September came in flat from a year ago, better than the 0.1% dip forecast by analysts and following a 0.2% increase in August.

Compared to a month ago, CPI fell 0.2% in September, as expected, following a 0.1% drop in August.

“Overall, there is nothing in this report that would persuade Fed officials to hike interest rates before the end of this year,” said Steve Murphy, US economist at Capital Economics.

“But it will be much harder to leave rates at near-zero next year when possibly both headline and core CPI inflation will be above 2%.”

Speaking in the afternoon, New York Fed president William Dudley said he would favour a rate increase this year if economic growth, employment and inflation perform in line with forecasts.

Speaking at the Brookings Institution in Washington, he said the Fed must be clear about its plans for rates but should not be strict on using mathematical formulas.

In other US news, the Philly Fed manufacturing index improved to -4.5 from -6 in September but this still fell short of analysts’ expectations for the index to rise to -1.

According to the Department of Labor, the number of first time unemployment benefits claimants in the US unexpectedly fell last week to match the lowest level in 42 years. New claims declined by 7,000 in the week ended 10 October to 255,000, compared with analysts' expectations for a modest increase to 270,000.

Meanwhile, a higher than anticipated increase in Chinese lending figures gave the market a boost.

China’s banks issued 1.05trn yuan in new yuan loans in September, compared to 809.6bn yuan in August and analysts’ expectations of 850bn yuan.

“Although this will add to concerns about the trajectory of Chinese debt levels, in the short-run it will nonetheless be supportive of economic activity,” according to Capital Economics.

The report comes as a slight relief following Wednesday’s disappointing Chinese inflation figures which showed a slowdown to 1.6% growth in September from a year earlier, down from a 2% increase in August.

Among corporate stocks, Burberry plunged after reporting broadly flat sales in the six months to 30 September after a slowing in the second quarter due to its exposure to China. The luxury fashion retailer said it would cut costs to minimise the impact on full-year profits.

Smiths Group also was knocked on the market after Exane BNP Paribas downgraded it to ‘underperform’ from ‘neutral’ and cut the price target to 830p from 1,000p. It highlighted that organic sales growth has lagged the sector for years, and that the situation regarding legacy liabilities has improved but isn’t fully resolved.

ARM Holdings jumped after the wider semi-conductor sector was lifted by market chatter regarding possible mergers. Closer to home, Numis Securities reiterated its buy rating with a price target of 1,350p. However, late on Thursday, Liberum slapped a 'sell' recommendation on the stock, saying it was "highly unlikely to be acquired".

Unilever advanced after posting a jump in revenue in the third quarter and saying it expects underlying sales growth for the year to be towards the top end of its target range.

Hargreaves Lansdown continued its rally as Baroness Altmann confirmed the government's priorities for pension policy including the continued roll-out of auto-enrolment and the continued implementation of pension freedom, both of which Hargreaves is benefiting from, as results earlier in the week had shown.

Ashmore slid after reporting a 13% drop in assets under management in the first quarter, dented by net outflows and negative investment performance.

WH Smith gained after the retailer posted a rise in pre-tax profit for the year on the back of a good performance across the group, with the travel business in particular providing a boost.

Man Group rallied as it revealed a 2.5% increase in funds under management in the third quarter despite volatile markets.

Serco slumped after it was downgraded to a 'reduce' rating by analysts at HSBC, who said the government's proposed 'living wage' adds another tier of unknowns to the Serco story, and considerable risks to the margin upside.

Market Movers

FTSE 100 (UKX) 6,338.67 1.10%
FTSE 250 (MCX) 16,949.50 0.82%
techMARK (TASX) 3,019.32 1.04%

FTSE 100 - Risers

Hargreaves Lansdown (HL.) 1,400.00p 5.26%
ARM Holdings (ARM) 979.50p 4.98%
London Stock Exchange Group (LSE) 2,475.00p 4.21%
Unilever (ULVR) 2,890.00p 3.58%
St James's Place (STJ) 866.50p 3.28%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,302.00p -8.25%
Sports Direct International (SPD) 650.50p -3.63%
Glencore (GLEN) 117.80p -1.88%
Ashtead Group (AHT) 964.50p -1.48%
GKN (GKN) 280.50p -0.99%

FTSE 250 - Risers

Renishaw (RSW) 2,036.00p 7.72%
Man Group (EMG) 159.00p 5.16%
Evraz (EVR) 94.15p 4.79%
WH Smith (SMWH) 1,623.00p 4.74%
Kaz Minerals (KAZ) 135.40p 4.39%

FTSE 250 - Fallers

Card Factory (CARD) 351.30p -5.39%
Electrocomponents (ECM) 212.20p -3.81%
Petra Diamonds Ltd.(DI) (PDL) 94.60p -3.52%
Serco Group (SRP) 101.60p -3.15%
Nostrum Oil & Gas (NOG) 511.00p -2.29%