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FTSE 100 closes slightly lower as the pound firms after stronger-than-expected inflation data

The index of blue-chip shares ended the day down 0.1% or points at 7,178.01 points after the CPI data
Sterling failed to keep above the US$1.39 level it was sitting at earlier in the day
  • FTSE 100 closes down 9.05 points

  • UK Jan inflation comes in higher-than-expected

  • TUI shares jump after earnings

  • Miners cling onto gains



The FTSE 100 closed slightly down, after a choppy session, taking its lead from the stronger pound, which was boosted by the stronger-than-expected January inflation data - reaching close to its highest level in nearly six years.

The FTSE 100 eased 0.13% or 9.05 points at 7,168.01 points.

"The big source of fright out there in the market is higher inflation. It's centred in the U.S, but it's a global phenomenon," said Jasper Lawler, from London Capital Group.

The mining sector however managed to pare losses, led by Glencore International PLC closed up 9.10p or 2.48% at 375.80p, BHP Billiton plc gained 27.20p or 1.81% at 1,532.20p and Rio Tinto PLC rose 1.59% at 3,957.50.. 

TUI, broke the trend and closed off highs, up 2.26% after the company said that its summer trading was "very good."

3.50pm: Pound comes off best levels against the dollar

The pound has eased off the levels seen after the UK inflation data earlier.

Sterling is down 0.15% against the euro at €1.1240. Against the dollar it is up 0.38% at US$1.3890 but even then it failed to keep above the US$1.39 level it reached earlier in the session.

“Though the global indices are broadly negative, the markets haven’t coped too badly with a pretty damn hawkish UK CPI reading,” said Connor Campbell, financial analyst at Spreadex.

“It’ll be interesting to see if investors have the same kind of reaction to tomorrow’s US figures – after all, it was fears that the country’s inflation would continue to creep higher that helped spark the recent market bloodbath.”

3.20pm: Small businesses more optimistic, survey shows

US small business optimism rose more than expected in January, a survey by the National Federation of Independent Business has revealed.

 The small-business optimism index increased by 2 points to 106.9, beating expectations of 105.3 as 32% of owners said they thought it was a good time to expand.

Some 34% of survey respondents reported job openings in January, compared to 31% a month ago. 

2.40pm: US stocks open lower

US stocks opened in the red after Donald Trump unveiled his proposed federal budget.

The Dow Jones Industrial Average fell 170 points to 24,448, the S&P 500 dropped 15 points to 2,642 and the Nasdaq shed 31 points to 6,952.

Investors are taking a more cautious approach as they digest Trump’s federal budget, which will increase the US deficit, and await key US inflation figures on Wednesday. 

2.00pm: FCA 'lost control' of RBS GRG report, says Nicky Morgan

The Treasury Select Committee is to publish the financial regulator’s report into the mistreatment of small businesses by the Royal Bank of Scotland’s global restructuring group (GRG).

Committee chair Nicky Morgan is using her powers to require the Financial Conduct Authority to publish or provide the report by Friday. 

If the Committee receives the report on time, it is expected to publish it in full next week.  

“If the FCA doesn’t publish or provide the report by Friday, it will have breached an order of the House of Commons and may be found in contempt of Parliament,” Morgan said.

The FCA has published a summary of the report, which details allegations of wrongdoing by former staff of GRG, after it was leaked. The regulator has been urged to publish the report in full.

“A version of the report is now in the public domain. The FCA has completely lost control of the publication process,” Morgan said.

The FCA has argued that it cannot legally publish the report as it was compiled confidentially and individuals accused of wrongdoing had a legal right to reply before publication.

1.20pm: US stock futures point to end of two-day rally

US stock futures fell as investors exercise caution ahead of inflation data on Wednesday and concerns about Donald Trump's proposed federal budget. 

Dow Jones Industrial Average futures dropped 136 points to 24,448, S&P 500 futures fell 12 points to 2,643 and Nasdaq futures slid 31 points to 6,500.

On Monday stocks rallied for the second day running, rebounding from steep losses last week.

President Trump on Monday proposed a US$4.4trn Federal budget that would add US$984bn to the federal deficit next year. The deficit would rise some US$7trn over the next decade.

In corporate news, Under Armour Inc (NYSE:UAA) shares jumped in pre-market trade after the sports gear maker posted fourth quarter revenue that beat expectations.

AmerisourceBergen Corp.(NYSE:ABC) shares surged after Walgreens Boots Alliance Inc (NASDAQ:WBA) reportedly made a takeover approach for the drug distributor. Shares in Walgreens dropped. 

12.30pm: Amazon to cut hundreds of jobs Inc (NASDAQ:AMZN) is set to cut hundreds of jobs at its Seattle headquarters and global operations.

The Seattle Times first reported the job cuts, which will affect Amazon's retail operations as it attempts to streamline the business after several years of rapid expansion.

Amazon confirmed the repors, saying it is working to offer affected employees new roles

The company said it expects "small reductions in a couple of places and aggressive hiring in many others".

12.00pm: FTSE gains in lunchtime trading

The FTSE 100 edged up 16 points to 7,193 in midday trade as official data showed inflation held at 3% in January.

Economists had expected inflation to ease to 2.9% but a rise in fuel prices meAnt it didn’t budge, remaining well above the Bank of England’s 2% target.

The data strengthened bets the BoE will raise interest rates again soon to tackle high inflation, sending the pound higher against the dollar and the euro.

Sterling rose 0.46% versus the dollar at US$1.3903 and increased 0.09% against the euro at €1.1267.

On the company front, TUI PLC (LON:TUI) was the top riser on the FTSE after reiterating its guidance as it narrowed its 2017 loss, cut its debt and reported a higher turnover.

Smiths Group PLC (LON:SMIN) gained after Barclays initiated coverage of the stock with an Overweight rating.

Anglo American PLC (LON:ALL) rallied after its subsidiary Kumba Iron Ore reported an increase in full year revenue and profit.

Imperial Brands PLC (LON:IMB) shares fell after Citigroup cut its target price to 2,850p

Acacia Mining PLC (LON:ACA) continued to decline a day after reporting a drop in full year earnings and scrapping its dividend due to an export ban in Tanzania. 

11.15am: Inflation expected to ease 

Inflation stuck at 3% in January but many analysts continue to expect a steady decline this year as the impact of a weaker pound fades.

“With sterling’s past drop now likely to have worked through, and domestic price pressures expected  to firm slowly amid gradually rising earnings growth and middle of the road growth, we expect to see a gradual downward trend in inflation take hold through 2018,” said Howard Archer, chief economist advisor to the EY Item Club.

“We expect inflation to fall back to 2.1% by the end of 2018.”

Archer said oil prices have since come off their mid-January highs and he does not expect further strong gains. He added that earnings growth is likely to pick up gradually despite a tight labour market as firms try to keep costs low amid an uncertain and challenging environment. 

"Fragile consumer confidence is likely to deter workers from pushing hard for significAntly increased pay rises, despite recent higher inflation and a tight labour market," he said.

10.30am: Producer price inflation slows 

Unlike consumer prices, factory goods price inflation slowed in January.

The annual producer price inflation rate fell to 4.7% from 5.4% in December.

The ONS said: “Factory goods price inflation continued to slow, with food prices falling in January. The growth in the cost of raw materials also slowed, with the prices of some imported materials falling.”

10.20am: House price inflation ticks higher

Alongside the inflation figures, the Office for National Statistics also released data on house prices.

House price inflation rose to an annual rate of 5.2% in December from 5.0% in November. Economists were expecting HPI of 4.9%.

"There aren't enough transactions going through at the moment and it's not simply down to lack of supply,” said Sam Mitchell, chief executive at online estate agents HouseSimple.

"We are seeing much more of a disconnect between buyers and sellers.

"The gap appears to be is widening between asking price and the sale agreed price. In London especially, sellers and buyers don't appear to be on the same page.”

10.10am: Pounds strengthens as imminent rate hike seen as likely

The pound has strengthened after disappointing inflation data raised bets the Bank of England will raise interest rates again soon.

Sterling rose 0.33% against the dollar to US$1.3883 and increased 0.17% versus the euro to €1.1276.

Economists had been expecting inflation to gradually fall back to the BoE’s 2% target over the coming year but it has held at 3%.

“This adds further weight to the case for higher interest rates sooner rather than later,” said Ben Brettel, senior economist at Hargreaves Lansdown.

“Indeed Bank of England policymakers said last week they’ll try and bring inflation back to target more quickly than previously expected, which means rates could rise faster and further than Anticipated. “

Brettel added that the persistent inflation also has implications for the UK’s ongoing consumer squeeze given that wage growth remains stagnAnt.

9.55am: What inflation means for interest rates

The Bank of England has been facing pressure to raise interest rates to tackle stubbornly high inflation.

The latest inflation figures showed higher prices of food and fuel offset lower prices for recreational and culture such as admissions to zoos and gardens.

“Despite speculation about a looming rate rise, if inflation remains in check, there’s no incentive for the Bank of England to put up rates too soon,” said Maike Currie, investment director for personal investing at Fidelity International

“This means the stock market will be one of the few places offering an inflation beating return.”

The central bank said last week rates may need to rise “somewhat earlier and by a somewhat greater extent” than previously expected.  And policymaker Gertjan Vlieghe said on Monday that a further rate rise is likely.

David Cheetham, chief market analyst at XTB online trading, noted the hawkish stance adopted by the Bank, saying: “This leaves plenty of scope for disappointment going forward and after failing to rally on another supportive economic event there could be some further downside ahead for the Pound which posted its largest weekly decline against the Buck in over4 months on Friday night.”  

Jacob Deppe, head of rrading at online trading platform, Infinox, said: “Stubbornly high inflation in the months ahead will only strengthen the argument for a rate hike in May and possibly one, if not two, further rate hikes before the end of the year.

“In fact Bank governor, Mark Carney, will probably use this result to justify building a buffer with interest rates, in order to create room to cut when Brexit goes through next March. Though this risks stunting the growth needed to absorb a very possible hard Brexit."

9.30am: UK inflation remains unchanged

UK consumer price inflation held at an annual rate of 3.0% in January, missing expectations of 2.9%.

On the month the CPI fell 0.5% against expectations for a 0.6% dip and following a 0.4% month-on-month rise in December.

Core CPI, which strips out volatile food and energy prices, was 2.7% year-on-year,  up from 2.5% in December and higher than the 2.6% predicted by economists.

The retail price index - on which train fare hikes are based - rose 4% in January, as expected, compared to 4.10% in December.

8.30am: FTSE marks time ahead of inflation figures

The FTSE 100 defied the early predictions of a positive start to proceedings in London to fall seven points to 7,169.86 with traders keeping their powder dry ahead of inflation figures at 9.30am.

Leading the risers list with a 2% gain was TUI (LON:TUI) after a reasonably upbeat quarterly trading statement from the tour operator.

In focus early on but little moved were the oil majors after the well-ranked team at Morgan Stanley put out its review of the sector.

This came with a downgrade to ‘equal weight’ from ‘overweight’ on BP (LON:BP), while Shell’s (LON:RDSA) price target was cut from £30.40 to £28.30.

Sticking with the broker calls, but moving down a division to the FTSE 250, Dixons Carphone (LON:DC.) received a 2% boost as Cenkos move to ‘buy’ from ‘hold’ on the stock.

Proactive news headlines:

SDX Energy Inc (LON:SDX) (CVE:SDX) told investors it has secured a drill rig for a programme of at least four new wells in Egypt. The company said the rig will be released from its present job in late February, meaning it should be available and mobilised ready for the first new SDX well in mid-March.

Eland Oil & Gas PLC (LON:ELA) has delivered another strong production update from the Opuama field in Nigeria. Overall the field, from its four wells, is currently producing at a rate of around 22,000 bopd.

Mosman Oil And Gas Limited (LON:MSMN) produced 3,558 barrels in the four months to January from its Welch project in Texas. Cash flow from the project was also positive over the period. The first phase of workovers has established production of up to 40 barrels per day.

Ebiquity plc (LON:EBQ) is to sell its advertising intelligence (AdIntel) business to Nielsen Holdings PLC for £26mln in cash. Ebiquity said the disposal would increase its focus on its Media Value Measurement (MVM) and Marketing Performance Optimisation (MPO) divisions, which historically have shown faster rates of growth than the Market Intelligence (MI) division.

Gfinity Plc (LON:GFIN) has announced that UNILAD esports team, backed by its global media namesake, will join the third season of the Elite Series, taking place in the Gfinity Arena in London next month. As part of an agreement, UNILAD will host content from the third season of the Gfinity Elite series across multiple channels during eight weeks of competition.

Tlou Energy Ltd. (LON:TLOU) has been asked by the Botswana government to re-tender for the 100Mw Lesedi coal bed methane-powered power station contract. The Ministry of Mineral Resources, Green Technology and Energy Security has requested that both short-listed bidding companies, Tlou and Sekaname, re-submit bids.

MaxCyte PLC (LON:MXCT) has appointed a new independent director who brings with him three decades’ of experience of the life sciences industry gleaned working with one of the pioneers of biotechnology. He is Richard Douglas, who was senior vice president of corporate development and corporate officer at Genzyme Corporation from 1989 until the business’ sale to Sanofi in 2011.

Pan African Resources plc (LON:PAF) delivered just over 85,000 ounces of gold in during the six months to December 2017. That was somewhat lower than the amount delivered in the corresponding period in 2016, as labour disputes, processing and underground development issues all took a toll. Nonetheless, the company was still able to turn in profits of £3.3mln, and to fund a dividend for the full year of 0.88p.

Amur Minerals Corporation (LON:AMC) has secured a US$10mln convertible loan to allow it to continue with work at the Kun-Manie nickel sulphide deposit in Russia. Amur will draw down US$4mln of the new money tomorrow.

Metal Tiger PLC (LON:MTR) yesterday provided an update with regard to the company’s investment in MOD Resources Limited (ASX:MOD), saying it currently holds 111.2mln MOD shares valued at present at A$6.00mln (circa £3.395mln) as at Friday’s ASX closing price of A$0.054 per share. The firm said this represents 5.87% of the issued share capital of MOD. Metal Tiger also holds 1,541,667 MOD warrAnts with an exercise price of $A0.06 and an expiry date of 15 April 2019.

Learning Technologies Group PLC (LON:LTG) the leading integrated e-learning services and technologies provider, announced that two of its directors sold shares in the company on 12 February 2018 in order to satisfy institutional buying demand. It said its chief executive, Jonathan Satchell and its chief strategy officer, Piers Lea both sold 3mln at a price of 75p each. Following these share dealings, Satchell is interested in 100,139,995 Learning Tech ordinary shares, representing approximately 17.4%% of the company's issued share capital, and Lea is interested in 13,023,383 ordinary shares, representing approximately 2.3% of the issued share capital.

Oracle Power PLC (LON:ORCP) announced that its chairman Mark Steed yesterday purchased 657,500 ordinary shares of the company on the market, in two transactions - 650,000 shares at a price of 1.6p each; and 7,500 shares at a price of 1.619p each. The group said, following these transactions, Steed's beneficial interest in the company stands at 1,000,000 ordinary shares, representing 0.0946% of the issued share capital.

6.45am: Footsie called higher 

The FTSE 100 is expected to push higher in early trading on Tuesday following further strong gains overnight by US and Asian markets, although some nerves may set in ahead of the latest UK inflation numbers due later this morning.

Spread betting firm CMC Markets expects the UK blue chip index to open around 19 points higher at 7,196, having gained 84 points on Monday as last week's volatile performance faded.

US stocks continued their bounce back overnight after last week posting their biggest weekly drop in two years, with the Dow Jones adding 410 points at 24,601 and both the other two main indexes seeing good gains.

In Asia today, stocks also recovered from the near two-year lows hit last Friday helped by firmer commodity prices, with the Shanghai composite index up 1.2% lifted too by talk of possible Chinese government support.

Inflation the key

On currency markets, the pound was mixed, up a touch versus the dollar and lower against the euro with all eyes on January’s UK consumer prices index, especially given worries that the pace of interest rate hikes could pick up in the face of inflation concerns.

The UK consumer price inflation fell to 3.0% in December from a five-year high of 3.1% in November, but it remains well above the central bank’s 2.0% target.

“Recent inflation rises have been primarily driven by currency effects, and with sterling on the up, the rate of inflation will continue its slowdown,” said Nancy Curtin, chief investment officer at Close Brothers Asset Management.

Stubbornly high inflation coupled with the BoE’s view that slack in the UK economy has reduced, led policymakers to say at their policy meeting last week that interest rates may need to rise sooner than expected.

Better to travel than arrive for TUI

On the corporate front, FTSE 100-listed holidays firm TUI AG (LON:TUI) is expected to issue a first quarter trading update when it holds its annual general meeting on Tuesday.

In a preview, analysts at French broker Kepler Cheuvreux said they think that TUI will indicate an improving underlying booking situation, although they believe this has not translated into better earnings.

RWS Holdings PLC (LON:RWS), the AIM-listed language support services group, specialising in translation and intellectual property, will also give a trading update at its AGM on Tuesday.

Analysts at Numis Securities think the early performance of Czech firm Moravia, acquired at the start of November, will be a particular focus, in light of the slower growth in 2017 reported in a recent press release.

The analysts said they also expect an update on the likely impact of the US tax cuts which they think should be positive versus the consensus 24% tax figure, albeit with a weaker US dollar having an offsetting negative translational and transactional effects.

SignificAnt events expected on Tuesday February 13:

Interims: A&J Mucklow Group PLC (LON:MKLW), Animalcare PLC (LON:ANCR), Hargreaves Services PLC (LON:HDP), Oncimmune Holdings PLC (LON:ONC), Pan-African Resources PLC (LON:PAF)

Finals: BHP Billiton plc (LON:BLT)

Trading update: TUI AG (Q1), RWS Holdings PLC (LON:RWS)

Economic data: UK CPI, RPI, PPI HPI inflation; UK construction output

Around the markets:

  • Sterling: US$1.3851, up 0.1%
  • Gold: US$1,324.60 an ounce, up 0.1%
  • Brent crude: US$59.62 a barrel, up 0.6%

City Headlines:

  • RBS scandal report leaked online in defiance of City watchdog – The Times
  • Carillion: accountAnts accused of ‘feasting’ on company – The Guardian
  • Rupert Murdoch offers protections for Sky News in bid to get his company’s £11.7bn takeover of Sky over finishing line – Daily Mail
  • Morrisons to enter Channel Islands market with franchise and wholesale deal – Daily Telegraph
  • British Airways owner IAG invests in start-up VolAntio which aims to tackle flight overbooking troubles – CityAM
  • Melrose urged to ask pensions regulator to examine bid – Financial Times
  • Online retail giAnt Amazon cutting hundreds of jobs as it focuses on investing in rapidly growing areas - Daily Mail
  • German court finds Facebook’s data collection was illegal – Daily Telegraph
  • Walgreens Boots Alliance in talks to buy AmerisourceBergen – Financial Times
  • Ant Financial seeks $5 billion in funding ahead of IPO – Financial Time
  • Alibaba deal to bring Disney shows to Chinese streaming service – Financial Times
  • Vue sees big picture in Saudi Arabia move – The Times
  • Total Chief promises spending discipline as profits flow – Financial Times
  • BNP Paribas top banker welcomes a touch of volatility – Financial Times
  • Apollo joins PGGM in bid for Akzo Nobel unit – Financial Times
  • ArcelorMittal challenges for control of Essar Steel – Financial Times
  • Puma scores upbeat outlook for 2018 with AC Milan partnership - CityAM
  • TDC accepts $6.6 billion takeover bid from Macquarie consortium – Financial Times
  • Cluff determined to find farm-out partners despite handing over reins – Energy Voice
  • Trump pledges to fix infrastructure but $200 billion plan falls well short – The Guardian
  • World’s first regulated whisky investment fund launches in Stockholm – The Independent

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