London open: Stocks muted as inflation hits fresh 30-year high
London stocks were little changed in early trade on Wednesday amid easing geopolitical tensions, as data showed UK inflation hit a fresh 30-year high in January.
At 0830 GMT, the FTSE 100 was up just 0.1% at 7,612.53, while sterling was 0.2% firmer against the dollar at 1.3564.
Richard Hunter, head of markets at Interactive Investor, said: "One of the twin pressure valves gripping the market has been slightly released, while the other remains strongly in evidence.
"Apparent signs of a de-escalation of tensions between Russia and Ukraine lifted sentiment, while also resulting in a drop in the oil price on the back of lesser supply concerns. The withdrawal of some Russian troops seems to have been accompanied by comments that the door remained open for diplomatic discussions, which was sufficient to prompt a relief rally.
"On the other hand, the current elevated level of inflation remains a real concern on both sides of the pond.
"US producer prices rose once more, implying that high inflation is much less transitory than had been anticipated and that, equally, it will need to be dealt with aggressively by a Federal Reserve which may currently be behind the curve. The latest Fed minutes are due to be released later today, and will be keenly analysed by investors seeking a nuance on the central bank’s latest thinking on its tapering programme, rate hikes and its own view on inflation prospects.
"Meanwhile, in the UK the latest inflation reading has also confirmed that higher energy costs, rising wages, ongoing supply chain disruptions and stronger demand have all conspired to keep upward pressure on prices in place."
Figures released earlier by the Office for National Statistics showed that inflation hit 5.5% in January as consumer prices reached their highest level since 1992.
The rise compared with December's 5.4% and forecasts of an unchanged figure and is another sign of the increasing squeeze on household budgets. The ONS said there had been fewer January sales as retailers looked to pass on higher costs.
"Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year," said ONS chief economist Grant Fitzner.
He added that the rising cost of some household goods and increases in rents also pushed up inflation. However, these were partially offset by lower fuel prices after record highs at the end of last year.
Electricity prices rose by 19.2% year on year, with gas prices surging 28.3% due to energy price cap increases last April and October 2021, and rising energy prices in Northern Ireland, which is not subject to regulatory capping measures.
The Bank of England earlier this month said it expected inflation would peak at around 7.25% in April, when a 54% rise in regulated household energy bills take effect.
It has already hiked interest rates twice since December to 0.5% from 0.1%. Economists are tipping another rise to 0.75% or 1% on March 17 after the central bank’s next meeting.
In equity markets, Indivior surged to the top of the FTSE 250 after saying it was considering a US listing for its shares as the drugs company swung to an annual profit and predicted strong growth for its Sublocade opioid.
Primary Health Properties also rose after it lifted its dividend and unveiled a rise in annual earnings, driven by demand for facilities to catch up on the backlog of delayed operations due to the Covid pandemic.
In broker note action, BAE Systems was a little weaker after a downgrade to ‘equalweight’ at Morgan Stanley, while Howden Joinery was boosted by an upgrade to ‘buy’ at Citi.
Market Movers
FTSE 100 (UKX) 7,612.53 0.05%
FTSE 250 (MCX) 21,923.13 0.32%
techMARK (TASX) 4,405.60 0.03%
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 176.10p 2.15%
Polymetal International (POLY) 1,149.00p 1.73%
Hargreaves Lansdown (HL.) 1,324.50p 1.42%
SEGRO (SGRO) 1,273.50p 0.99%
InterContinental Hotels Group (IHG) 5,146.00p 0.90%
British Land Company (BLND) 543.60p 0.78%
Mondi (MNDI) 1,918.00p 0.74%
Prudential (PRU) 1,215.50p 0.70%
CRH (CDI) (CRH) 3,732.00p 0.70%
Smith (DS) (SMDS) 376.10p 0.67%
FTSE 100 - Fallers
Ocado Group (OCDO) 1,340.00p -1.69%
Tesco (TSCO) 296.50p -0.90%
JD Sports Fashion (JD.) 167.45p -0.83%
Sainsbury (J) (SBRY) 279.30p -0.82%
Antofagasta (ANTO) 1,374.50p -0.79%
Barratt Developments (BDEV) 616.60p -0.71%
BAE Systems (BA.) 598.00p -0.70%
Royal Mail (RMG) 435.00p -0.66%
Kingfisher (KGF) 318.70p -0.62%
Auto Trader Group (AUTO) 646.20p -0.58%
FTSE 250 - Risers
Indivior (INDV) 243.40p 6.85%
Petropavlovsk (POG) 16.46p 4.84%
Primary Health Properties (PHP) 136.60p 2.32%
TUI AG Reg Shs (DI) (TUI) 294.00p 1.98%
Hammerson (HMSO) 38.45p 1.85%
Micro Focus International (MCRO) 430.00p 1.85%
Wood Group (John) (WG.) 240.20p 1.78%
Petershill Partners (PHLL) 212.00p 1.68%
Fidelity China Special Situations (FCSS) 309.00p 1.64%
Ferrexpo (FXPO) 289.00p 1.62%
FTSE 250 - Fallers
Darktrace (DARK) 351.60p -2.22%
Edinburgh Worldwide Inv Trust (EWI) 234.00p -2.09%
HGCapital Trust (HGT) 427.50p -1.72%
Allianz Technology Trust (ATT) 288.00p -1.20%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 100.80p -1.18%
Virgin Money UK (VMUK) 209.70p -1.13%
Pantheon International (PIN) 311.00p -0.96%
Fidelity European Trust (FEV) 314.00p -0.95%
Schroder Oriental Income Fund Ltd. (SOI) 272.50p -0.91%
WH Smith (SMWH) 1,640.50p -0.88%