- FTSE 100 adds 135 points
- Wall Street advances, extending recent gains
- UK June inflation at 7.9%, lowest level since March 2022
4.45pm: FTSE 100 in strong finish
London's equity benchmark finished strongly following signs of slowing UK inflation, jumping 1.8% to 7,588 points and hitting an intraday high above 7,625 for the first time in a month.
"The FTSE 100 is enjoying its best day of the year so far, led by housebuilders and other real estate stocks. After weeks of declines, it looks like the FTSE 100 has found a low," said IG market analyst Chris Beauchamp.
“UK investors have watched enviously as US markets recover as CPI on the far side of the Atlantic dropped, but today they have had plenty of reason to celebrate following the CPI print this morning."
3.55pm: German/UK power link
Work has begun on a £2.4bn project to build the first-ever power cable linking Britain and Germany, one of the world's largest interconnector projects.
NeuConnect Interconnector, which is leading the move to connect two of Europe’s largest energy markets, said the new energy link will extend over 725 kilometres (450 miles) in length, mostly under the sea.
The cables could transfer up to 1.4 gigawatts (GW) of electricity to flow in either direction between Britain and Germany, NeuConnect added in a statement.
NeuConnect will construct new converter stations on the Isle of Grain, in south-east England, connected by subsea cables travelling through British, Dutch and German waters to the Wilhelmshaven region in northern Germany
The project, which is expected to be operational by 2028, is designed to help boost energy security as Europe seeks alternatives to Russian pipeline gas following Moscow's invasion of Ukraine last year.
3.25pm: Oxford Street rent-free
Small businesses are being offered rent-free shops on London’s Oxford Street as part of plans to boost the prime retail area in the capital, BBC News has reported.
The £10mln scheme, called ‘Meanwhile On: Oxford Street’ and run by Westminster Council and the New West End Company, is also offering a 70% reduction in business rates, a fit-out of stores, as well as marketing and business support.
The scheme is expected to support about 35 brands over three years, with the first opening in the autumn. Each brand will initially be offered support for six months.
The stores being offered will be ones previously occupied by firms such as American Candy Stores, many of which the council has been investigating, in conjunction with Trading Standards, amid allegations that some of the companies have evaded business rates to the amount of £8mln, the report said.
Councillor Geoff Barraclough, Westminster’s cabinet member for planning and economic development, told the BBC that the plan would "help future-proof the nation's high street by offering innovative local businesses as alternatives to low-quality occupiers and candy stores”.
3.05pm: Crude wanted
Oil prices were higher on Wednesday supported by China's pledge to reinvigorate economic growth and expectations that global interest rate rises could soon be curtailed after recent inflation declines.
UK Brent crude was up 1.1% to $79.97 in afternoon trading, while US West Texas Intermediate (WTI) crude was 1.0% higher at $76.79 a barrel.
After weak GDP numbers earlier this week, China's top economic planner pledged on Tuesday that the Communist country would roll out policies to "restore and expand" consumption in the world's second-largest economy, which could boost oil demand.
In another positive sign, European Central Bank (ECB) governing council member Klaas Knot on Tuesday suggested that rate hikes beyond next week's meeting were "by no means a certainty".
Meanwhile, the latest CPI data out of the UK and Canada showed signs of cooling inflation, also lifting sentiment.
"Traders have started to become a lot more optimistic as inflation eases off...any improvement in the inflation data also means an improvement in oil demand," said Naeem Aslam, chief investment officer at Zaye Capital Markets.
2.40pm: Wall Street in fine fettle, FTSE holds strong
The FTSE 100 held strong, just below fresh session lows above the 7,600 level midafternoon, buoyed by below-forecast UK inflation data.
US stocks started Wednesday higher, extending the strong gains recorded in the previous session as investors eyed weak US housing starts data and assessed another batch of corporate earnings.
Around 15 minutes after the New York open, the Dow Jones Industrials Average was up 136 points, or 0.4% at 35,088, while the S&P 500 gained 0.3%, and the Nasdaq Composite added 0.2%. All three major indexes recorded their highest closes since April 2022 on Tuesday.
2.35pm: US housing starts miss
US housing starts fell by 8.0% to 1,434,000 in June, below the consensus forecast for 1,480,000, with net revisions at -64,000. Meanwhile, building permits dropped 3.7% to 1,440,000, also below the consensus forecast of 1,490,000.
Kieran Clancy, senior US economist at Pantheon Macroeconomics commented: "The drop in June starts reverses only part of the 16% surge in May; the upward trend remains intact."
He added: "The drop in headline June starts is due to a 7% fall in single-family starts and a 9.9% plunge in the multi-family component."
And: "The drop in June multi-family starts, by contrast, reverses all the May jump, and the 12.8% decline in multi-family permits point to further declines in starts in July and August.
"Soaring growth in rents led to a boom in multi-family construction in 2021/early 2022, but growth in rents on new leases has since rolled over, and is driving multi-family starts back towards their pre-Covid level."
2.15pm: UK energy switching jumps
June marked a jump in the number of households switching energy suppliers as market competition heated up thanks to falling prices, according to a report by Energy UK.
Some 170,636 customers switched to a new supplier last month, up 77% on a year earlier when firms were reluctant to offer competitive deals due to higher wholesale energy costs.
57% of the switches were between larger suppliers, including British Gas, Bulb, EDF, E.ON, Octopus, OVO and Scottish Power, according to industry body Energy UK.
Smaller and mid-sized suppliers made leeway though, gaining 4,747 new customers over the month, equating to around 3.3% of switches.
“It is worth noting that this data is from the last month before the price cap fell below the Energy Price Guarantee,” Energy UK said in its report.
1.30pm: A look at London’s fallers and risers
Fallers
Watkin Jones - down 39% to 46.9p: Shares plummeted on Wednesday as the UK residential rental property firm issued a profit warning and said its chief executive Richard Simpson has stepped down with immediate effect. Multiple previously announced property deals are now in question as a result of higher interest rates and prevailing economic uncertainty, with the company warning of “a greater degree of risk” to transactions completed by the year’s end.
Risers
Ariana Resources - up 15% to 2.48p: Shares jumped as it confirmed construction work had resumed at the Tavsan mine in Turkey after a court ruling in favour of partner and operator Zenit. Work at the project had been halted while the Administrative court in Kütahya considered environmental concerns raised in the local community.
Cohort - up 9.8% to 489p: Shares in the management consulting company jumped after preliminary results showed an increase in profits and revenues. Sales in the year to 30 April 2023 grew by 33% to £182.7mln, while the firm posted a record adjusted operating profit of £19.1mln.
1.00pm: US preview
US blue chips are expected to start a touch higher on Wednesday, consolidating after the Dow Jones Industrial Average (DJIA) posted its longest winning streak since March 2021 in the previous session, with another flood of corporate earnings to dominate attention.
In pre-market trading, futures for the DJIA were 0.1% firmer, while those for the Nasdaq 100 also added 0.1%, but contracts for the S&P 500 edged 0.02% lower.
On Tuesday, the DJIA notched up a seventh straight positive session, rising 366.58 points, or 1.1% to close at 34,951, while the S&P 500 gained 0.7%, and the Nasdaq Composite added 0.8%. All three major averages recorded their highest closes since April 2022.
The US second-quarter earnings season has got off to a good start - of the 38 companies in the S&P 500 that have reported results so far, 82% have exceeded expectations, according to FactSet data.
On the earnings slate for Wednesday, Goldman Sachs (NYSE:GS) is set to report before the opening bell, while Netflix, Tesla, IBM and United Airlines will post earnings after the close.
On the data front, June housing starts, which will be released at 8.30am ET, are expected to have dropped by 9.3%, according to economists, down from the big 21.7% jump posted in May.
Meanwhile, June building permits are anticipated to have declined 0.7%, according to Dow Jones consensus estimates. That would be down from a 5.2% gain the previous month.
TickMill Group’s market analyst Patrick Munnelly commented: "Stateside, the housing sector has been impacted by higher interest rates, and today's housing starts and building permits data will provide insights into the sector's recent performance.
"Yesterday's retail sales report showed resilient consumer demand, and market participants will be interested to see if the housing data support that trend."
12.46pm: Interest rates yet to peak
Despite softer-than-expected inflation figures, Capital Economics has raised its forecast for the peak BoE rate.
However, the economics was previously forecasting a peak of 5.25%, which was much lower than most rivals and the market's previous expectation of over 6%.
The firm believes interest rates will now peak at 5.5%, which is still lower than the consensus of 5.75%, with chief UK economist Paul Dales believing the biggest difference will come in the base rate being cut faster and further than market pricing in 2024 and 2025.
“We still think that the Bank will raise interest rates at the next policy meeting on 3 August. Our hunch is that it will opt for a 25 basis points rise, from 5% to 5.25%,” Dales said.
“But there is still a chance that the Bank repeats the 50bps hike in June. What’s more, the current momentum in wage growth, core services CPI inflation and the real economy suggests that the Bank may not have enough evidence to conclude that it has raised rates far enough by the following policy meeting on 21 September.”
12.21pm: Pound falls as inflation eases, boosting the Footsie
The pound slipped below US$1.30 after data indicated inflation eased ahead of expectations, signalling the Bank of England may not need to raise rates as much as initially predicted.
Despite this, it remained pretty close to a 15-month high of US$1.314 reached last Friday, currently trading at US$1.291.
The inflation rate eased to 7.9% in June, marking the lowest level since March 2022 and slightly below the market consensus of 8.2%.
Elsewhere, investors have recently been shifting away from the dollar due to signs of cooling inflation in the US, which has raised expectations that the Federal Reserve's aggressive policy tightening may be approaching an end.
12.02pm: Proft warnings on the rise
Profit warnings among UK-listed companies reached their highest reported quarter in three years with interest rates wreaking havoc.
Public companies issued 66 profit warnings between April and June this year, according to an EY-Parthenon report, with warnings rising year-on-year for the seventh consecutive quarter, the longest run since 2008.
Last quarter’s warnings are the highest since the second quarter of 2020 when 166 profit warnings were issued.
Nearly a fifth of UK-listed companies have issued a profit warning in the last 12 months, with persistent inflation and rising interest rates playing a significant role in the second quarter.
“The sustained rise in profit warnings over the last two years reflects the extraordinary mix of challenges faced by UK businesses over that timeframe,” said Jo Robinson, EY-Parthenon partner and UK&I turnaround and restructuring strategy leader.
“It’s now clear that the effects of these low-growth conditions are spreading to nearly all corners of the UK economy, and this quarter we’ve seen earnings pressure extend up the value chain into the mid-market,” Robinson added.
11.34am: Credit Suisse job cuts on the horizon
The culling at Credit Suisse shows no signs of abating, with investment bankers in London told 80 jobs will be cut by the end of July.
Credit Suisse, which is in the process of integrating its business with UBS, plans to cut roughly a third of its London investment banking staff.
Sources familiar with the matter, cited in website Financial News, said around 17 of those sackings will be managing directors.
11.11am: House prices not falling fast enough
House values aren’t falling quick enough for Myron Jobson, senior personal finance analyst at Interactive Investor - though many homeowners might not initially agree.
“House prices are not falling fast enough to offset the heightened cost burden from the uptick in mortgage rates. At present, pesky high mortgage rates are winning the tug of war with falling property prices, to the detriment of housing affordability,” he said.
On rental prices, he believes higher mortgage costs has sparked a chain reaction in the property market which has led to renters paying record high prices.
“When rents start climbing, aspiring homeowners face a double-edged sword. On one hand, the increasing cost of renting can make it even more challenging for them to save up for a deposit,” Jobson said.
“With the cost of borrowing on the rise, the dream of homeownership may start slipping away and those who were once keen on purchasing a home suddenly shift their sights toward the rental market, fuelling demand. Landlords may seize the opportunity to raise rents. They may also foresee higher costs when they remortgage stemming from higher mortgage rates.”
10.52am: House price growth eases as rents soar
UK house prices for May were around £7,000 lower than last September’s peak, according to fresh data from the Office of National Statistics (ONS).
The average UK house prices increased by 1.9% in the 12 months to May, down from a revised 3.2% in April 2023, with the northeast seeing the highest annual percentage change among all English regions at 4%.
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House prices were however £6,000 higher than May 2022.
Private rental prices paid by tenants in the UK rose by 5.1% in the year to June, up from 5% in the 12 months to May.
London prices continued to outpace the national average, with the annual percentage change in private rental prices 5.3% in the 12 months to June 2023 and at its highest annual rate since September 2012.
Shares in Barratt Developments were up 6.2% to 450p, while Persimmon jumped 7.6% to 1,175p.
10am: Best day for FTSE mid-caps since Feb
The rally for the FTSE 250 has topped 520 points, a 2.9% gain to 16,162 - the biggest gain in five months.
“Boom! We’ve just seen the strongest daily movement in UK mid cap stocks since February, with the FTSE 250 index initially jumping 3% on news of inflation cooling more than expected in June,” says Danni Hewson, head of financial analysis at AJ Bell.
She points out that the FTSE 100's positive move is less pronounced than its less heralded sibling because the blue-chip index has less exposure to the UK economy.
“The inflation reading has dampened the outlook for interest rate hikes in the UK, much to the excitement of investors. Two-year gilts fell from 5.079% to 4.842%, sterling fell 0.7% to $1.2937 in the space of 20 minutes and interest rate-sensitive stocks soared on the news."
However, she had some dampening words to add, observing that there have been “plenty of false dawns over the past year regarding the ‘pivot’ and analysing trends means looking at multiple data points over many months.
“Yes, inflation is now much lower than at the start of the year, but June’s 7.9% reading is still considerably higher than the Bank of England’s 2% target. That means further rate hikes cannot be ruled out.
“Nevertheless, stock markets are all about anticipating what will happen next. A further decline in inflation for July could really get the ball rolling for UK equities and lift them out of the mud. While the FTSE 250 is in party mode today, the rally only puts the index back to levels last seen in June."
The FTSE 100 meanwhile has also had a second wind, now having jumped 119 points or 1.6% to 7,573.
9.35am: FTSE back in positive territory for 2023
Markets bullishness is persisting this morning, led by sectors that are seen as benefitting from inflation easing and interest rate rises coming to a halt soon.
A weaker pound, currently down 0.74% against the US dollar at 1.2938, is provided the FTSE 100 with an early boost given its majority exposure to overseas earnings.
The Footsie is "clawing its way back" into positive territory for the year, notes Richard Hunter, head of markets at Interactive Investor.
At 7,552, up 98.5 points or 1.32% so far today, the blue-chip index is up 1.3% from the 7,451.74 it started the year.
The more domestically focused FTSE 250 is up 490 points today or 2.64% to 19,108.83, leaving the index ahead by 1.7% in the year to date.
Helping things, the housebuilding sector is trading at a one-month high, points out market analyst Neil Wilson at Finalto, "as yields come back down and the market reprices more sensibly for how high the Bank of England goes with rates".
He says the sector "was too oversold as market was too bearish on high the BoE would need to go.
"Anything with any rate sensitivity is in play today – utilities +2%, real estate +7%."
8.57am: Crypto update: Bitcoin bulls offer support after 5 days of losses
Bitcoin (BTC) closed below US$30,000 for the first time in two weeks on Tuesday, having lost just shy of one percentage point to hit the midnight bell at US$29,500.
It marked the fifth straight day of losses for the BTC/USDT pair.
As observed in the Binance order book, bullish support kicked in at this price point to bring bitcoin back above 30k.
At the time of writing, the BTC/USDT pair was changing hands almost precisely at US$30,000, having added half a percentage point in this morning’s Asia trading hours.
Today’s order book places the support line at US$28,600, with US$32,000 tipped as the resistance point.
As for Ethereum the world’s second-largest cryptocurrency fell 0.7% to US$1,897 on Tuesday before climbing back to US$1,908 this morning.
Back to London markets, the footsie blue-chip index has remained bullish, adding 1.27% to 7,548 in the first hour of trading.
8.30am: More reactions to softer inflation
City folk are analysing the improved inflation reading from the ONS and what it all means.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says June’s CPI report gives the BoE's monetary policy committee "the green light" to only increase interest rates by 25 basis points next month, "rather than by the hefty 50bp increment priced-in by markets as the most likely outcome".
He noted that the headline CPI rate in June matched the MPC’s forecast in its May's monetary policy report, "a massive improvement from May’s figures, which overshot its forecast by 0.4pp".
UK CPI inflation down to 7.9% in June, as broadly indicated by the @SPGlobalPMI prices data. Still high, but the #PMI points to further sharp CPI falls in the months ahead. pic.twitter.com/pf4a9szfIA
— Chris Williamson (@WilliamsonChris) July 19, 2023
Victoria Scholar, head of investment at Interactive Investor, says, "June’s data was the first time in five months that inflation did not come in hotter-than-expected. The pound is snapping its recent winning streak, heading for its biggest one-day drop this month, depreciating by over half a percent against the US dollar and touching its lowest level against the euro since May."
She also noted that inflation is still high, and Rishi Sunak’s goal to halve inflation this year still "looks like it will be difficult to achieve".
"The Bank of England is still expected to continue hiking rates to ease price pressures back down towards its 2% target."
"Investors now expect a 60% chance of a 25-basis point hike at its next meeting in early August, with more hawkish bets being wound back from earlier in the week when markets were pricing in a 58% chance of a more aggressive 50 basis point hike.
"Longer term, the Bank rate is now expected to peak somewhere between 5.75% and 6% in late 2023 / early 2024, down from prior expectations for it to peak at 6%."
Big fall in 2 year Gilt yields in wake over lower than expected June UK inflation figures - down 25 basis points to 4.84%... pic.twitter.com/cCLcOPwBhL
— Ben Chu (@BenChu_) July 19, 2023
The FTSE has come off its early peak, now at 7,549, which is still a 1.26% gain.
There are only four fallers in the blue-chip index, WPP PLC, Antofagasta PLC, Glencore PLC and Fresnillo PLC.
Outside the Footsie, Aston Martin Lagonda (LSE:AML) is trading sharply higher after Goldman Sachs (NYSE:GS) upgraded the stock to a 'buy' from 'neutral', almost doubling its price target to 413p from 212p.
Synthomer (LSE:SYNT) is up 8% as analysts and investors react to its positive trading update yesterday.
Housebuilders and property developers are topping both the FTSE 100 and 250, including Great Portland Estates, Redrow and British Land.
8.16am: FTSE jumps at the open
London's blue-chip shares leapt higher in early trading, following the good news that inflation finally softened.
The FTSE 100 rose 107 points or 1.44% to 7561 in the first 15 minutes of deals.
Housebuilders and banks are topping the leaderboard, with Persimmon PLC up almost 9%, Taylor Wimpey PLC (LSE:TW.) and Barratt Developments PLC rising 7%, Berkeley Group Holdings PLC (LSE:BKG) 5%.
Lloyds Banking Group PLC (LSE:LLOY) and NatWest are both up over 2%, while Hargreaves Lansdown PLC is up 4%.
Sterling tumbled after the inflation reading earlier, down 0.6% versus the US dollar and euro.
As a reminder, headline UK CPI inflation for June eased to 7.9% from 8.7% the previous month, while core CPI inflation dropped to 6.9% from the 31-year high of 7.1% the previous month.
"Finally, we have some good news on UK inflation," said James Smith, economist at ING.
"Is this enough to convince the Bank of England to opt for a 25bp rate hike in August? We think it probably will – but it's going to be a close call," Smith added.
In company news, National Grid shares are up 2.25% after it said it is selling down its stake in the UK gas network from 40% to 20%. It might be controversial though, on energy security ground and with owner Macquarie having come in for flack over its ownership of other UK utilities such as Thames Water.
7.59am: UK to help pay for Tata battery gigafactory
Good news for the UK car sector (and for Somerset) as Jaguar Land Rover’s owner has announced it will build an electric vehicle battery factory in the UK, having secured hundreds of millions in government funding.
Some £4bn will be invested into the new 40GWh site in Bridgewater, Somerset, which is expected to create around 9,000 jobs and begin supplying power units from 2026.
Prime minister Rishi Sunak was moved to comment, saying the move is a “huge vote of confidence in Britain” meanwhile, after rumours had circulated that the plant would be built in mainland Europe.
7.35am: National Grid gas sale
Shares in National Grid PLC (LSE:NG.) could move higher when the market opens after it struck a deal to further sell its ownership of the UK's gas network down to just 20%, for a price of £700mln.
The FTSE 100 group said is selling half of its 40% stake in its UK gas transmission and metering business to a consortium made up of Australian investment giant Macquarie Asset Management and British Columbia Investment Management Corporation, which is already the majority owner, having bought a 60% stake in January.
Regulatory clearance will be needed.
National Grid said today's sale, which is expected to complete in the second half of this year, and the terms of the option are both on "equivalent financial terms" to the first transaction.
There was criticism of the original purchase by Macquarie, which has also invested in UK water companies Thames Water and Southern Water where its ownership has been the subject of controversy for significant debt accumulation and sewage discharge.
7.20am: How will FTSE 100 react to UK inflation?
When the FTSE 100 opens at 8am it will show the reaction to new figures showing UK inflation coming in lower than expected.
London’s blue-chip index was being called 35 points higher on spread-betting platforms after the announcement from the Office for National Statistics.
This showed the UK consumer price index in June was up 7.9% on a year ago, with headline CPI inflation easing from 8.7% the previous month, and by more than the 8.2% that economists forecast.
CPI was up 0.1% on the previous month, which was also less than the 0.4% expected.
Core CPI inflation, which excludes food and fuel, softened to 6.9% from the 31-year high of 7.1% the previous month, which economists predicted would stay the same.
Annual inflation slowed in June 2023.
▪️ Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 7.3% in the 12 months to June 2023, down from 7.9% in May
▪️ Consumer Prices Index (CPI) rose by 7.9%, down from 8.7% in May
— Office for National Statistics (ONS) (@ONS) July 19, 2023
CPIH, the measure that includes owner occupiers’ housing costs, and is the index most preferred by the Bank of England’s rate-setting committee, slowed to 7.3% from 7.9% in May.
For the FTSE, today follows a gain of 47 points yesterday and a positive session on Wall Street overnight, with the Dow Jones closing up for the seventh session in a row, up 1.1%, while the Nasdaq added 0.8%, the S&P 500 improved 0.7% and the small-cap Russell 2000 gained 1.3%.