- FTSE 100 finishes firrmly higher
- Centrica climbs after update
- Halfords goes into reverse
4.47pm: FTSE closes ahead
FTSE 100 continued its ascent on Thursday as traders were upbeat about the UK economy and the US dollar fell.
Britain's premier share index finished up around 69 points, or 0.89%, at 7,794.
"A slew of trading updates has pushed the FTSE 100 to 7800 for the first time since May 2018, as the UK index continues to outshine its US peers. Housebuilders and retailers have found plenty to be cheery about, if only because things seem to have brightened considerably for the UK economy in the last few months," said Chris Beauchamp, chief market analyst at IG.
"The second half of the year still seems murky, as everyone has been at pains to point out in their trading updates, but for now the situation seems a lot better than feared."
3.50pm: Footsie hits highest since May 2018
Leading shares have come within less than 100 points of their all time high, helped by some positive trading statements and better than expected US inflation figures.
Heading into the close the FTSE 100 is up 74.66 points or 0.97% at 7,779.64, having earlier hit 7808, its highest level since May 23 2018 and close to the record intra-day high of 7903 the same month.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets have continued to push higher after today’s US CPI report came in as expected, with the FTSE100 pushing above 7,800 for the first time since May 2018, as it looks to close in on its record high of 7,900...
"It’s been another bumper day of trading announcements from a raft of UK companies, and by and large they haven’t been as bad as perhaps they could have been.
"If anything, the challenging economic environment over the past few years has encouraged a focus on reform and innovation."
Persimmon PLC (LSE:PSN) continues to lead the way, up 8.79% after its update and pushing the rest of the housebuilding sector higher.
Barratt Developments PLC (LSE:BDEV) is 6.93% better and Taylor Wimpey PLC (LSE:TW.) is up 4.54%.
JD Sports Fashion PLC (LSE:JD.) has added 5.8% after a positive note from Goldman Sachs (NYSE:GS) in the wake of this week's results.
Premier Inn owner Whitbread PLC (LSE:WTB) has put on 4.69% following an update, while British Gas owner Centrica PLC (LSE:CNA) has also pleased the market with its latest announcement, climbing 4.54%.
International Consolidated Airlines Group SA (LSE:IAG) has flown 4.53% higher on reports it is getting closer to a €1bn deal to buy Spain's Air Europe.
But B&M European Value Retail SA (LSE:BME) is down 3.94% as its shares went ex-dividend, and SSE PLC (LSE:SSE) has lost 1.48% for the same reason.
3.10pm: Inflation update may allow Fed to ease rate rises
The in-line US inflation figures add to the idea that the Federal Reserve will ease the pace of interest rate rises.
Simon Harvey, head of FX Analysis at Monex Europe, said: "Taken as a whole, we think today’s inflation data clears the path for the Fed to decelerate further and hike 25bps at their next meeting on February 1st, while it also poses risks to their view on the terminal rate being 5-5.25% and the Fed’s ability to keep rates there until 2024.
"At this current juncture, such a view puts a lot of the emphasis on the labour markets inability to recalibrate and/or the need for economic activity data to hold up better than expected. The market response to today’s data reflects this. Pricing of the Fed’s implied path dropped around 5-10 basis points across the curve for 2023, while the dollar moderately extended its losses on the day due to lower US rates."
Meanwhile this chart shows the effect of various sectors on the overall inflation figure.
US CPI YoY w/Contributions: {ECAN<Go>} pic.twitter.com/lKqeb27Kam
— Michael McDonough (@M_McDonough) January 12, 2023
2.50pm: US investors cautious after data
After climbing into positive territory in pre-market trading, US stocks opened mixed on Thursday as investors weighed up the latest CPI data for December that showed inflation continues to trend downward but may not be enough to dissuade the Fed from its hawkish position.
Shortly after the market opened, the Dow Jones Industrial Average and S&P 500 were flat at 33,965 points and 3,968 points respectively, while the Nasdaq Composite had shed 13 points or 0.1% at 10,918 points.
BRI Wealth Management chief investment officer Dan Boardman-Weston noted that US inflation was at its lowest level in a year, having cooled over recent months due to falling commodity and goods prices largely linked to recessionary fears.
“Services inflation continues to remain high though and impacts from the Chinese economy re-opening may continue to cause concern over how far inflation will fall,” he said.
“The labour market remains extremely strong in America and the Fed fears that this will continue to stoke inflation, and so are persisting with the tightening cycle, despite economic storm clouds on the horizon.”
Boardman-Weston added that he expected that higher rates will subdue economic activity in 2023 and that this will lead to corporate profits falling and equities remaining under some pressure.
“It’s become clear this year that the Fed is intent on crushing inflation and future expectations of inflation. The higher interest rate environment required to tame inflation comes at the cost of economic growth, which likely comes at the cost of lower stock markets,” he said.
“The adage of ‘Don’t fight the Fed’ has been around for many years and will remain as relevant as ever in 2023.”
The uncertainty has pulled the FTSE 100 back from its best levels, and it is now up 33.13 points or 0.43% at 7758.11.
2.16pm: Worst of inflation could be over - Fed's Harker
The worst of the inflation surge now looks like it is over, according to Federal Reserve member Patrick Harker.
He said the Fed was likely to raise rates a few more times in 2023, but after a 50 basis point rise in December, he expected the increases to slow to 25 basis points.
Fed’s Harker: 25Bps Hikes ‘Will Be Appropriate Going Forward’
- Expects A Few More Hikes This Year
- Doesn’t See A Recession But GDP Should Slow To 1% This Year
- Worst Of Inflation Surge Is Now Likely Over
- Unemployment Likely To Tick Up To 4.5% This Year From Current 3.5%
— LiveSquawk (@LiveSquawk) January 12, 2023
1.53pm: US jobless claims fall
Meanwhile US weekly jobless claims are lower than expected.
The number of Americans seeking unemployment benefit for the first time fell by 1,000 to 205,000.
Analysts had been expecting a rise to 215,000.
The previous week's figure was revised up by 2,000 to 206,000.
Taken together the inflation and jobs news is giving the market pause for thought.
Futures for the Dow Jones Industrial Average, the S&P 500 and Nasdaq are now marginally in negative territory having started virtually flat, and then initially moved higher after the reports.
1.42pm: Fall in energy costs helps US CPI improvement
On a monthly basis, the US CPI fell 0.1% in December after rising 0.1% in November.
The biggest contributor to the decrease was the index for gasoline, said the Bureau of Labor Statistic.
The energy index decreased 4.5% over the month as the gasoline index declined; other major energy component indexes increased over the month.
The food index increased 0.3% over the month with the food at home index rising 0.2%.
The index for all items less food and energy rose 0.3% in December, after rising 0.2% in November. Again, this was in line with expectations.
Naeem Aslam, chief market analyst at Avatrade, said: "Inflation is moving in the right direction, which should keep some pressure off the Fed. This is really important to keep in mind. Now what matters the most is the noise coming from the Fed members."
Year-over-year, December's CPI cooldown brings us to 6.5% headline and 5.7% core (excluding food & energy) inflation - down from peaks of 9.1% and 6.6%, respectively.
It'll take time to reach 2%, but we're moving in the right direction. pic.twitter.com/xNcXJQFy1j
— Neil Gerardo-MRX Chairman-ID#32140089 (@NeilGerardo) January 12, 2023
1.30pm: US consumer price index improves
US inflation has come in exactly as expected.
The consumer price index rose 6.5% in December, down from 7.1% the previous month.
Core inflation, which strips out food and energy costs, was 5.7%.
Both numbers were as analysts expected.
12.30pm: Bank of England finishes sale of mini-budget related bonds
Remember Kwasi Kwarteng's disastrous mini-budget last autumn?
Remember the bond market crashing chaotically as a result, putting pension funds at risk, and the Bank of England having to step in and buy up gilts in an attempt to stabilise the situation?
Well the Bank has now successfully sold all the government bonds it bought during that period - £19.3bn worth in total.
Of that, £12.1bn were long-dated conventional gilts and £7.2bn were index-linked gilts.
It said: "The purchases were made to restore orderly market conditions following dysfunction in the UK gilt market, and in doing so reduce risks from contagion to credit conditions for UK households and businesses."
Sales of the bonds began on 29 November and continued periodically until this week's conclusion.
12.12pm: IAG shares take off on Air Europa deal hopes
Shares in British Airways owner International Consolidated Airlines Group SA (LSE:IAG) have flown 2.9% higher after Spanish media reported that the government in Madrid had brokered a meeting to close the potential acquisition of Air Europa "imminently".
The Anglo-Iberian group originally announced it was buying Spanish carrier Air Europa for €1bn in late 2019, but the purchase was put on hold as coronavirus hit the airline sector and regulators on the continent and in the UK raised concerns about competition.
But the presidential office and the Ministry of Transport in Madrid have brought the bosses of IAG's Iberia and Air Europa together in a meeting "for the first time", business website El Confidencial reported on Thursday, "to speed up a vital agreement for the country".
11.50am: US markets cautious ahead of inflation data
Wall Street is expected to open flat as the market awaits inflation data, scheduled for release an hour before the open, that will play a key role in the Federal Reserve’s next move on interest rates.
Futures for the Dow Jones Industrial Average rose 0.1% in Thursday pre-market trading, while those for the broader S&P 500 index were unchanged and contracts for the Nasdaq-100 declined 0.1%.
Stocks ended higher on Wednesday as investors took the view that the inflation figures would show a slowdown in the pricing pressures that have forced the Fed to hike interest rates.
At the close the DJIA was up 0.8% at 33,972, the S&P 500 advanced 1.3% to 3,970 and the Nasdaq Composite jumped 1.8% to 10,932.
“This inflation print has been the main topic of conversation all week,” commented Craig Erlam, senior market analyst at OANDA. “The jobs report last Friday changed the dynamic in the markets and ensured that not only was this CPI report going to be important but in all likelihood pivotal ahead of next month's Fed meeting.”
The CPI release is expected to reveal inflation eased further in December, with the headline rate forecast to show annual growth of 6.5% from 7.1% a month earlier. Core CPI, which excludes volatile energy and food prices, may have slowed to 5.7% from 6%.
Following a positive start to the year for equity markets, ING global head of markets Chris Turner said: “A number in line with consensus probably allows the risk rally to continue.
“Expectations of a Fed easing cycle in the second half of the year, China reopening and lower energy prices are all encouraging this reallocation towards risk."
Back in the UK, the FTSE 100 continues to gain ground, up 53.91 points or 0.7% at 7778.89, having earlier hit a new four and a half year high of 7786.
11.27am: Brokers make an impact
Following a positive reaction to its update yesterday, JD Sports Fashion PLC (LSE:JD.) has jumped another 6.24% to 160.5p after Goldman Sachs (NYSE:GS) issued a buy note and raised its price target from 180p to 205p.
But credit rating specialist Experian (LSE:EXPN) is down 1.35% to 2851p as RBS moved from sector perform to underperform, and cut its target from 2900p to 2500p.
And insurer Beazley PLC (LSE:BEZ) has fallen 1.05% to 659.5p as UBS moved from neutral to sell with a 646p target.
UBS said: "Recent share performance now leaves the stock fully valued, in our view..
"Beazley is trading very close to Hiscox's 2024 estimated P/E at 7.2 times versus 7.6 times. Given relative balance sheet strength and the current operating trends, we believe this is too generous and we downgrade Beazley to sell. We think the greater weight of investment income within the earnings profile, coupled with greater catastrophe linked risk within the portfolio, merits a lower P/E than historical levels."
10.56am: Businesses hit by strike action and worker shortage
One in six businesses or 16% said in December they had been affected by the spate of industrial action, according to the latest survey from the Office for National Statistics.
Of those, 28% said they were unable to obtain necessary goods for their business and 23% were unable to operate fully.
When looking ahead to February 2023, one in five (20%) businesses reported energy prices were their main concern, followed by inflation of goods and services prices (16%) and falling demand of goods and services (14%).
On top of that, more than a quarter of businesses with ten or more employees said they were experiencing a shortage of workers. More than half (56%) of those businesses reported employees were working increased hours as a result of these shortages and 40% reported they were unable to meet demands.
In early Jan 2023, 28% of businesses with 10 or more employees said they were experiencing a shortage of workers.
Of those:
▪️ 56% said employees were working increased hours
▪️ 40% said they were unable to meet demands
— Office for National Statistics (ONS) (@ONS) January 12, 2023
However the ONS also said online job advertisements had fallen, despite the shortage of workers.
Figures from @adzuna show the total number of online job adverts fell below the pre #COVID19 baseline in the week to 6 Jan 2023 for the first time since mid-Apr 2021.
Job adverts have been trending downwards for almost a year ????
— Office for National Statistics (ONS) (@ONS) January 12, 2023
10.20am: Persimmon takes pole position
Housebuilder Persimmon PLC (LSE:PSN) is now top of the FTSE 100 pile after its latest update.
Its shares have built up a 7.06% rise after only edging a little higher in the immediate reaction to news its completions last year were at the top end of its forecasts.
Victoria Scholar at interactive investor said: “Persimmon completed 14,868 new home sales in 2022, towards the upper end of its guidance with the average private selling price increasing by 5% to £272,200, helping to lift shares towards the top of the FTSE 100. However, it warned about weakness facing the housing market and macroeconomic pressures which are weighing on demand. Persimmon also said it is ‘too early to predict when there will be a recovery in demand.’
"Both Barratt Development yesterday and Persimmon today have flagged the slowdown in the housing market as a key headwind for the sector in 2023. Rising mortgage rates, a slowing housing market, build cost inflation, the fallout from the mini-budget and the end of the Help to Buy scheme have been major challenges lately. Many potential property buyers are holding off amid hopes that mortgages rates will settle, and the housing market will become more affordable down the line.
"Persimmon’s stock market valuation has almost halved over a one-year period, underperforming rivals Taylor Wimpey, Barratt Developments and Bellway."
But today's rise has helped support the leading index, which is currently up 44.93 points or 0.58% at 7769.91.
9.45am: Mixed bag for retailers
Amid a host of companies updates, a number of retailers stand out.
ASOS PLC (LSE:ASC) has accelerated by 14.7% despite a hefty fall in sales in the run-up to Christmas, hit by falling consumer confidence, what it called "disruption in the delivery market" and a strong performance the previous year as online shopping boomed during the pandemic,
But investors seemed to like its plans for £300mln of cost savings.
Victoria Scholar, head of investment at interactive investor said: “Asos reported UK sales during the final four months of 2022 down by 8%, blaming weak consumer sentiment while overall revenue dropped by 3%. The online retailer outlined a cost savings and profit optimisation plan including around a 10% reduction in staff costs, which it says will have an impact of over £300mln in the full-year 2023. Investors are cheering these plans, sending shares higher by around 15% in today’s trade...
"Even after today’s jump, shares in Asos have still slumped by more than 70% over the last year and are down more than 90% over a five-year period, highlighting how Asos still has a long way to go to restore investor confidence.”
Meanwhile Marks and Spencer Group PLC (LSE:MKS) are 2.02% lower despite a strong sales performance over Christmas, after disappointment it is not raising its profit guidance.
UBS said: "While the trading was robust, we believe that buyside was looking for an upgrade that hasn't materialised today
"Marks' outlook talks about inflationary pressures impacting both consumers and business as they take action to structurally reduce costs and reinforce customer proposition. Despite the strong performance, Marks cited clear macro headwinds ahead and underlying cost pressures and reiterated the profit guidance at the November interim results."
Elsewhere Halfords Group PLC (LSE:HFD) has gone into reverse, down 22% after it cut its profit forecast from £65mln-£75mln to £50mln-£60mln. This follows profit warnings in June and November last year.
AJ Bell investment director Russ Mould said: "Just when it looked as if Halfords was turning a corner and leaving its problems in the rear-view mirror, along comes another bundle of issues which knock its earnings trajectory off track.
"The key problems are weakness in cycling and consumer tyres along with a shortage of skilled technicians hurting its motor service.
“The latter is a frustrating situation for the company. Demand for motoring services is very strong, but to not be able to capture all the potential business due to labour issues is frustrating...
“The cycling market has slumped since a boom period in the early stages of the pandemic when people were desperate to buy any form of two-wheeled bike they could...
"Many people who bought bikes in the pandemic have now lost their desire to meander along the country’s roads and thus the second-hand market is awash with cut-price products.”
9.08am: Vodafone higher after executive changes
Vodafone Group PLC (LSE:VOD) has been lifted by news of a couple of structural changes, following Nick Read's departure as chief executive last month.
These include Aldo Bisio, chief executive of Vodafone Italy, becoming group chief commercial officer as well, and Vodafone Spain joining the company's Europe cluster.
Vodafone said the changes came as the telecoms group worked to "accelerate our commercial performance and drive shareholder value."
Its shares are up 3.02%.
8.40am: Ex-divs fail to spoil optimistic mood
Premier Inn owner Whitbread PLC (LSE:WTB) is also helping to push the leading index higher.
Its shares are up 2.98% after it reported a strong third quarter performance, with like for like sales up 18.3% with a strong rebound from its German business.
Centrica PLC (LSE:CNA) is still leading the way after its update, 5.19% higher.
So the FTSE 100 is up 43.78 points or 0.57% at 7768.76, despite a handful of major companies going ex-dividend.
These included B&M European Value Retail SA (LSE:BME), down 4.45%, SSE PLC (LSE:SSE), 1.95% lower and The Sage Group PLC (LSE:SGE), off 1.23%.
8.15am: Markets move higher but mixed response to trading updates
Leading shares are heading higher ahead of the key US inflation figures.
The FTSE 100 is up 28.30 points or 0.37% at 7753.28 in early trading.
Michael Hewson, chief market analyst at CMC Markets UK, said: "Optimism over today’s US inflation numbers has helped drive a positive start to 2023 for both European and US markets so far this year...
"Sentiment in Europe has also been helped by the recent milder weather which has fuelled optimism that the start of 2023 might offer some respite from further increases in energy prices."
The market believes recent figures may lead to a more measured approach by the US Federal Reserve to rate rises, despite hawkish comments from some Fed members earlier this week.
Hewson said: "The belief that a pivot is coming may also have something to do with the dire predictions of the likes of the IMF last week, and earlier this week by the World Bank, who both warned the global economy was on a razors edge, and at risk of sliding into a prolonged recession
"[But] if core prices were to come in higher than expected we could see a sharp correction lower for stocks and a sharp rebound in the US dollar, and a shift in focus back to 50bps in February.
"It’s also important to remember, as was the case in Australia yesterday, that inflation doesn’t fall in a straight line, after annual CPI there jumped more than expected from 6.9% in October to 7.3% in November, which in turn could prompt the RBA to be more hawkish next month after they slowed the pace of their rate hikes two months ago.
"This is what should concern Fed officials the most, and what markets appear to be forgetting in their pricing of the Fed’s next move.
"It’s also important to remember given how markets front run any indication of a shift in policy, that Fed officials might look to err more towards doing too much than too little, and as such might be tempted to overtighten in order to get inflation falling sustainability towards the 2% target."
British Gas owner Centrica PLC (LSE:CNA) has climbed 5.35% after it raised its earnings forecast after a strong performance and appointed Russel O'Brien as its chief financial officer. O'Brien was most recently treasurer at Shell.
Centrica said it now expected full year adjusted earnings per share of more than 30p, compared to its forecast in November that earnings would be at the top end of a 15.1p to 26p range.
Housebuilder Persimmon PLC (LSE:PSN) has put on 0.66% although it warned of weaker sales in the second half.
Matt Britzman, Equity Analyst at Hargreaves Lansdown, said: “Persimmon has followed in the footsteps of rival housebuilder Barratt, warning of a material slowdown in demand over the fourth quarter as consumers battle higher mortgage costs. This fed through to lower sales rates, higher cancellations, and a hefty drop in forward orders. Though, it must be said, a lot of that was largely expected...
"The good news for Persimmon and indeed a lot of the sector is that balance sheets are robust, strong cash position provide plenty of shelter as we enter a more challenging phase of the cycle.”
Meanwhile a positive Christmas update from Tesco PLC (LSE:TSCO) has prompted some profit taking, and its shares are down 0.82%. It also cautioned there were challenging - that word again - conditions ahead.
7.00am: Positive start expected
Another bright start is expected in London as the FTSE 100 continues its strong start to 2023 with investors hoping today’s key US CPI figures will show a softening in pricing pressures across the pond.
Spread betting companies are calling London’s blue-chip index up by around 18 points.
“Today is the most important day of the trading week, in terms of economic data release, as the US will reveal its latest CPI update, and it could be a make-or-break moment for the market sentiment,” according to Ipek Ozkardeskaya, senior aalyst at Swissquote Bank.
“Consumer price inflation in the US probably eased to 6.5%, from 7.1% printed a month earlier.”
“Beyond the headline figure, the core inflation should be closely watched, and should also ease enough to spur Fed doves. The core inflation fell to 6% at last release, from a peak of 6.6% printed for October, and is expected to fall to 5.7% at today's release.”
Aside from the CPI numbers there will be plenty for investors to digest today with a hefty batch of trading updates from a number of City heavyweights due.
The UK’s largest food retailer, Tesco PLC (LSE:TSCO), Marks and Spencer Group PLC (LSE:MKS) (Marks and Spencer Group PLC (LSE:MKS)), DFS Furniture PLC (LSE:DFS), ASOS PLC (LSE:ASC) and Halfords Group PLC (LSE:HFD) are amongst those expected to update on their fortunes.
Away from the retailers and housebuilder, Persimmon PLC (LSE:PSN), will also update on trading following yesterday’s downbeat statement from Barratt Developments PLC (LSE:BDEV).
Across the pond and US markets pushed higher into the close with the Dow Jones Industrial Average up 268 points, or 0.8%, to 33,972, the S&P 500 up 50 points, or 1.28%, to 3,970, and the Nasdaq Composite up 189 points, or 1.76%, to 10,932.