London stocks had turned higher by midday on Wednesday, helped along by well-received updates from the likes of Pearson and Burberry, as data showed that UK inflation jumped to its highest level in nearly three decades in December.
The FTSE 100 was up 0.2% at 7,582.06, while sterling was up 0.2% against the dollar at 1.3630.
Figures released earlier by the Office for National Statistics showed that consumer price inflation rose to 5.4% from 5.1% in November, coming in above consensus expectations of 5.2% and making it increasingly likely the Bank of England will raise rates again next month. The last time inflation was higher was in March 1992, when it was 7.1%.
Core CPI inflation – which strips out volatile elements such as food and fuel – increased to 4.2% in December from 4.0% the month before, coming in above consensus expectations of 3.9%.
Meanwhile, the retail price index rose to 7.5% from 7.1% in November – its highest level since 1991. Analysts had been expecting 7.1%.
Grant Fitzner, chief economist at the ONS, said: “Food prices again grew strongly while increases in furniture and clothing also pushed up annual inflation.
“These large rises were slightly offset by petrol prices, which despite being at record levels were stable this month, but rose this time last year.
“The closures in the economy last year have impacted some items but, overall, this effect on the headline rate of inflation is negligible.”
The BoE’s next policy meeting is on 3 February. At the last meeting in December, the Bank hiked rates for the first time since the onset of the Covid pandemic, by 15 basis points.
Capital Economics said: “It’s no secret that inflation is going to rise even further. The increases in producer prices already seen have yet to fully filter through into consumer prices. And the surge in wholesale gas and electricity prices could result in an increase in utility prices on 1st April in the region of 50%. Those effects would be enough to push up CPI inflation to 7.0% in April. That would be higher than the peak of 6% that the Bank of England was forecasting when it raised rates in December.
“And although inflation will fall back thereafter, we think it will stay above 4% for all of this year and won’t drop to the 2% target until April 2023. That’s why we think the MPC will raise interest rates faster than most expect this year, from 0.25% to 1.25%, with the next hike to 0.50% coming on 3rd February.”
In equity markers, educational publisher Pearson surged to the top of the FTSE 100 as it raised annual profits guidance, driven by its assessment and qualification business.
Fashion retailer Burberry gained after it reported a 5% rise in third-quarter revenues driven by an acceleration in full price sales. The company said revenue for the 13 weeks to December 25 came in at £723m compared with £688m.
Segro was boosted by an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan, which said recent underperformance was a buying opportunity.
Crest Nicholson and WH Smith were also higher after well-received trading updates, while pub chain Wetherspoons rose despite warning it will swing to an interim loss.
On the downside, equipment rental firm Ashtead and plumbing and heating distributor Ashtead fell, with traders pointing to the fact the Empire State manufacturing index in the US turned negative in January for the first time in 20 months.
Market Movers
FTSE 100 (UKX) 7,582.06 0.24%
FTSE 250 (MCX) 22,704.00 0.23%
techMARK (TASX) 4,499.11 0.01%
FTSE 100 – Risers
Pearson (PSON) 677.40p 7.12%
Burberry Group (BRBY) 1,862.50p 6.10%
Polymetal International (POLY) 1,183.50p 4.50%
JD Sports Fashion (JD.) 194.80p 3.01%
SEGRO (SGRO) 1,330.50p 2.78%
Unilever (ULVR) 3,593.50p 2.19%
Antofagasta (ANTO) 1,469.50p 2.12%
Fresnillo (FRES) 813.80p 1.73%
Anglo American (AAL) 3,432.00p 1.66%
Entain (ENT) 1,734.00p 1.58%
FTSE 100 – Fallers
Ashtead Group (AHT) 5,278.00p -3.23%
Ferguson (FERG) 11,870.00p -2.10%
International Consolidated Airlines Group SA (CDI) (IAG) 162.60p -1.84%
GlaxoSmithKline (GSK) 1,673.80p -1.61%
Legal & General Group (LGEN) 298.30p -1.45%
Rolls-Royce Holdings (RR.) 123.86p -1.43%
SSE (SSE) 1,560.50p -1.14%
Halma (HLMA) 2,568.00p -0.96%
Phoenix Group Holdings (PHNX) 695.20p -0.88%
Melrose Industries (MRO) 164.80p -0.87%
FTSE 250 – Risers
WH Smith (SMWH) 1,652.50p 6.44%
Petropavlovsk (POG) 15.69p 6.30%
Watches of Switzerland Group (WOSG) 1,272.00p 4.61%
Wetherspoon (J.D.) (JDW) 944.00p 4.48%
BlackRock World Mining Trust (BRWM) 675.00p 4.01%
Johnson Matthey (JMAT) 2,007.00p 3.53%
National Express Group (NEX) 268.80p 3.15%
Pets at Home Group (PETS) 421.00p 2.93%
Cineworld Group (CINE) 43.43p 2.74%
Elementis (ELM) 140.90p 2.32%
FTSE 250 – Fallers
Liontrust Asset Management (LIO) 1,732.00p -3.56%
Baillie Gifford Shin Nippon (BGS) 181.40p -3.20%
Wood Group (John) (WG.) 233.30p -2.99%
Baillie Gifford Japan Trust (BGFD) 880.00p -2.87%
JPMorgan Japanese Inv Trust (JFJ) 578.00p -2.69%
Baltic Classifieds Group (BCG) 228.00p -2.56%
Darktrace (DARK) 423.60p -2.35%
Centamin (DI) (CEY) 89.34p -2.21%
Auction Technology Group (ATG) 1,158.00p -1.86%
Tyman (TYMN) 380.00p -1.81%
