- FTSE 100 closes 56 points higher.
- Inflation beats forecasts.
- BoE's Bailey says recession on the cards.
4.50pm: FTSE ahead
UK stocks rose on Wednesday as lower-than-expected inflation numbers fueled investor optimism for a potential early interest rate cut by the Bank of England.
The FTSE 100 finished at 7,568 points, a 0.8% gain on the day.
The pound weakened against the dollar, benefiting export-heavy FTSE 100 stocks.
Money markets now anticipate approximately 68 basis points of interest rate cuts from the BoE this year, up from about 58 bps before the data.
Coca-Cola HBC led gainers on the FTSE 100 with a record annual profit forecast, while Anglo American faced losses due to projected decreases in full-year operating profit.
3.59pm: BoE governor says recession ‘in the balance’
Bank of England governor Andrew Bailey has said it “hangs in the balance” whether the UK entered a technical recession or not towards the back end of last year.
Ahead of gross domestic product (GDP) figures due on Thursday morning, Bailey told the Lords Economic Affairs Committee that a second consecutive period of negative growth could be on the cards.
“In our February Monetary Policy Report it was frankly in the balance,” he said
“We didn’t have a recession in the forecast but it is at best flat. It wouldn’t take much to tip it either way frankly.”
Economists have forecast a 0.1% fall in GDP over the final quarter to December, which would follow another 0.1% decline between July and September.
This would see the UK dip into recession for the first time since the pandemic, or since 2009 when not accounting for Covid-19-related lockdown measures.
Commenting on Tuesday morning’s inflation reading of 4% for January Bailey added: “As far as I can tell [...] that amount of downward movement was pretty broad-based - a bit of it in energy, some in food but also some of in services as well, so that’s quite encouraging.”
“It leaves us broadly where we thought we were going to be but that’s obviously encouraging compared to where we could have been.”
3.44pm: Continental to cut thousands of jobs globally
Tyre firm Continental AG has announced it will cut some 7,150 jobs globally in a bid to make its auto firm more competitive amid a wider shift to electric vehicles.
Around 1,750 of the sackings will take place in the wing’s research and development department, with various sites also set to be affected.
“By streamlining our research and development network, we will leverage synergies and reduce costs,” executive board member Philipp von Hirschheydt said.
“Combined with our focus on shortened development times and high-growth future technologies, this will improve our long-term competitiveness.”
The cuts will equate to around 3.6% of the Germany-based company’s global workforce.
3.26pm: In case you missed it... Housebuilders buoyed further by new planning policy
Housebuilders continued to track higher on Tuesday afternoon, with changes to planning policies announced yesterday by the government fuelling gains.
Making it easier for developers to secure planning permission on brownfield land was the aim and US bank Citi said this should be achievable through the new plans.
Housebuilders rally on government's new planning proposals
Planning authorities in England's 20 largest cities and towns will now be subject to presumption in favour of brownfield development.
Persimmon was up 4% at 1,414p, Taylor Wimpey 2.4% at 144.8p and Barratt 2.2% at 476.2p.
2.58pm: Nasdaq leads way as US markets open higher
The Nasdaq led gains this morning as US markets opened higher following a tough session of trading on Tuesday.
Hotter-than-expected inflation had hit the markets, as hopes for rate cuts anytime soon looked to be dampened.
The Nasdaq Composite climbed 0.7% to 15,770 soon after Wednesday’s opening bell, with the S&P 500 also seeing strong gains of 0.5% to bring it closer back to the 5,000 mark at 4,980.
The Dow Jones ticked up 0.1% to 38,315, meanwhile.
Barrick Gold was among multiple firms reporting this morning, with the company slipping in early trading despite unveiling per share net income of US$0.27, above expectations.
Another reporter, Kraft Heinz Co (NASDAQ:KHC, ETR:KHNZ), also fell, after reporting below-anticipated sales as price increases failed to mitigate declining volumes.
2.36pm: Vodafone jumps after director appointed from partner
Vodafone Group PLC (LSE:VOD) emerged as one of the FTSE 100’s big risers come Tuesday afternoon, following the appointment of e& chief executive to its board.
Hatem Dowidar will join the company as a non-executive director from February 19, Vodafone said, after the firm penned a partnership with e& (Emirates Telecommunications Group) last May.
“He brings extensive experience within the telecommunications industry and has held senior positions across a range of companies in the Middle East, Africa and Europe,” Vodafone chair Jean-François van Boxmeer said.
“His appointment will further strengthen our strategic partnership.”
Shares climbed 4.9% to 67.32p.
2.18pm: Energy price cap fall to aid subsiding inflation
More on inflation now and analysts have eyed April’s anticipated reduction in Ofgem’s energy price cap as offering further scope for inflation to subside in the coming months.
“The rise in headline inflation in January, due to an increase in the Ofgem price cap, will likely be short-lived,” RBC Brewin Dolphin analyst Janet Mui commented.
“With analysts expecting Ofgem to announce a price cap reduction of over 10% for April 2024, there is a chance UK headline inflation can ease to around 2% at that time.”
Ofgem’s cap, which effectively determines household energy bills by setting a maximum suppliers can charge, has sat at £1,928 on an annualised basis since January.
This is higher than the cap for October to December, meaning households have been paying more for energy since January, in turn fuelling inflation.
However, Cornwall Insight analysts expect April’s price cap to be 14% lower at £1,660 per annum thanks to a fall in wholesale prices, with subsequent reductions also anticipated.
Figures released on Tuesday showed that prices rose by 4% in January, in line with December’s inflation and below market expectations of a 4.2% jump.
Speculation has since built that the Bank of England could commit to a series of base rate cuts this year, with an initial reduction taking place in the coming months.
1.30pm: Here's a recap of the big movers on the market today
Shares in HemoGenyx Pharmaceuticals (LSE:HEMO) rose 16% following the announcement that its chimeric bait receptor (CBR) technology for combatting airborne viral infections can be delivered intranasally using messenger RNA (mRNA).
Coca-Cola’s FTSE 100-listed packaging wing Coca-Cola HBC AG delivered 16.9% in organic revenue growth to €10.2 billion (£8.7 billion) in the past financial year.
Shares rose 7.7% to 2,376p.
Bloomsbury Publishing PLC (LSE:BMY)’s second profit upgrade in a matter of months could just be the beginning of an epic journey fuelled by further novel releases, analysts say.
Shares in the publisher climbed 10% to 540p.
Brahha Head Lithium Limited added 11.2% after analysis of a gravity survey completed in late 2023 has revealed "a significant gravity low over the Basin North area, interpreted as a deep, depositional centre for sedimentary rocks and a deep basement rock geological setting".
1.25pm: Eurozone stagnates as German GDP falls and France flatlines
Figures released on Tuesday show that the Eurozone economy stalled over the back end of last year.
As per the European Commission, gross domestic product (GDP) remained flat quarter-on-quarter over the final three months of the year.
This followed negative growth of -0.1% in the previous three-month period, with increases in Italian and Spanish GDP having been offset by a decline in Germany and a flat-lining of the French economy.
Euro area #GDP stable in Q4 2023, +0.1% compared with Q4 2022: flash estimate from #Eurostat https://t.co/gNZe1np0Tx pic.twitter.com/U3C4YYTQdM
— EU_Eurostat (@EU_Eurostat) February 14, 2024
“The European Central Bank is worried that an inflationary combination between accelerating unit labour costs, falling productivity and sticky collective bargaining agreements are contributing to upward underlying inflation pressures, threatening a timely return in inflation to 2%,” Pantheon Macro economists said.
“The key question is whether the governing council will focus on what we believe will be a steady fall in inflation over the course of the first half of the year, or whether it will remain focused on sticky wage growth.”
An initial base rate cut was forecast for April by the analysts, with the skewed figures preceding UK GDP data, due on Thursday.
12.59pm: Waitrose slashes own-brand prices
Waitrose went the other way to Virgin Media and O2, announcing price cuts to some 200 own-brand items.
Its Essential and Duchy Organic ranges have faced cuts of up to 8%, the supermarket said, with dairy, fish, meat, ready meals and frozen products having been reduced further.
Waitrose slashes own-brand prices as food inflation dips
The news comes after ONS data revealed on Tuesday morning that food prices fell for the first time in January since mid-2021.
Coupled with heavy discounting of furniture and household goods, the drop in food costs was welcomed by analysts, who said the weakening consumer goods prices were key in the UK’s road to base rate cuts.
12.45pm: Virgin Media and O2 to hike bills
Virgin Media and O2 customers face an 8.8% price hike from April after the retail price inflation numbers this morning.
Rivals such as BT use consumer price inflation for December as the base to set tariffs, with these set to rise by 7.9%, but Virgin uses the retail price index for January.
A Virgin Media O2 spokesperson said: "The amount we receive from price increases is greatly outweighed by the £5 million we invest every single day to upgrade our networks and services."
Virgin Media and 02 tariffs go up by 8.8%
Consumer group Which? criticised the pair over the news, arguing they had ignored calls for inflation-linked increases to be ditched this spring.
12.25pm: Bloomsbury leads FTSE all-share risers as analysts see further good times ahead
Bloomsbury Publishing PLC (LSE:BMY)’s second profit upgrade in a matter of months could just be the beginning of an epic journey fuelled by further novel releases, analysts say.
Indeed, shares in the London-listed publisher climbed nearly 10% to 540p after it told investors on Wednesday that profit and revenue for the year to February 29 would “significantly” beat expectations of £291.4 million and £37.2 million respectively.
Bloomsbury profit to beat hiked expectations on Sarah J. Maas success
This comes after the market hiked anticipations in December, with the January release of Sarah J. Maas’s latest novel, which subsequently became a bestseller, said to have fuelled earnings.
According to AJ Bell analyst Russ Mould, such growth on the back of Maas’s ‘House of Flame and Shadow’ may not stop there.
“Bloomsbury has at least another six of these potential sales waves locked in from future releases under contract with the author,” he noted.
What’s more, the release of new books often prompts readers to delve into authors’ back catalogues, in Mould’s view, likely bolstering Maas’s sales in this case.
12.00pm: US stocks seen higher after Tuesday’s losses
US stock markets are expected to open in the green on Wednesday after hotter-than-expected inflation data forced losses on Tuesday.
Futures trading has the NASDAQ opening 0.5% higher at 17,761, with the S&P 500 and Dow Jones expected up by 0.3% and 0.1% to 4,986 and 38,387 respectively.
A higher-than-expected inflation reading of 3.1% for December had hit trading on Wednesday, as hopes of base rate cuts anytime soon looked to be dampened.
“The focus is now turning to this week’s other data releases,” City Index analyst Fawad Razaqzadal said ahead of Wednesday’s open.
“Up next, we have retail sales, industrial production, jobless claims, and Manufacturing indices from Philadelphia and New York, all scheduled for release on Thursday.”
Upcoming data will have to show figures weakening significantly for short-term outlook on the likes of base rate cuts and US dollar exchange rates to improve, he added.
Back to Wednesday, Barrick Gold Corp, CME Group Inc (NASDAQ:CME), The Kraft Heinz Co (NASDAQ:KHC, ETR:KHNZ), Cisco Systems Inc (NASDAQ:CSCO, ETR:CIS), Occidental Petroleum Corp (NYSE:OXY), Quantumscape Corp (NYSE:QS) and Twilio Inc (NYSE:TWLO) are all due to report.
11.43am: Train drivers back further strike action
Train drivers from five operators have voted in favour of further strikes, leaving union Aslef with mandates for action against all 16 companies which it is in disputes with.
Chiltern Railways, c2c, East Midlands Railway, Northern Trains and TransPennine Trains workers all voted in favour of strikes, Aslef announced on Wednesday.
“These results show - yet again - a clear rejection by train drivers of the ridiculous offer put to us in April last year,” union boss Mick Whelan said.
This had promised to bring driver’s averages salaries to £65,000 for a 35-hour, four-day week, according to rail minister Huw Merriman.
11.26am: Coca-Cola soars on earnings beat, tops FTSE 100 risers
Coca-Cola HBC shares topped the FTSE 100 risers by mid-morning on Tuesday, following the fizzy drink’s packaging wing’s report of better-than-anticipated results.
Shares climbed 7% to 2,364p after the company reported organic revenue growth of 16.9% to €10.2 billion for the year to December.
Comparable operating profits climbed by 16.6% to €1.08billion, meanwhile.
Coca-Cola’s bottling group hits record profits
“We have delivered a stronger-than-expected financial performance in 2023, despite the significant headwinds to our business,” said the group.
In the meantime, the FTSE 100 index added 60 points to reach 7,573.
10.52am: Virgin Money to buy out Abrdn in joint investment firm
Virgin Money UK PLC (LSE:VMUK) has announced that it will buy out Abrdn’s stake in the duo’s joint investment business.
Through a £20 million deal, Virgin Money will buy Abrdn’s 50% stake in the business, known as Virgin Money Investments.
The pair had set up the firm in 2019, which had around £3.7 billion in assets under management and over 150,000 customers by December.
Virgin Money said the full takeover came after a new digital platform was rolled out in 2023, followed by a fresh pension offering.
“Taking full control of Virgin Money Investments will mean we can bring the investments and pensions business together with our deposits, mortgages, credit cards and daily banking, enabling us to help more customers feel confident to invest,” Virgin Money director Allegra Patrizi commented.
Abrdn PLC (LSE:ABDN) climbed 1.7% to 161.53p on Wednesday. Virgin Money gained 1% to reach 158.05p.
10.25am: Housebuilders climb on inflation figure and slowing house price declines
Persimmon PLC (LSE:PSN), Taylor Wimpey PLC (LSE:TW.) and Barratt Developments PLC (LSE:BDEV) sat among the FTSE 100’s main risers following Tuesday morning’s better-than-hoped inflation.
The trio had faced a tough Tuesday session on fears wage growth in December could continue to fuel inflation, in turn keeping interest rates and mortgages higher for longer.
Wednesday’s news that prices rose by 4% in January, against expectations of 4.2%, appeared to calm nerves though, with analysts showing optimism over rate cuts in the coming months on the back of the figure.
“It is a relief to see UK inflation coming in below expectations,” RBC Brewin Dolphin analyst Janet Mui commented.
“If we see more easing in services inflation together with some weakness in economic data [...] the Bank of England would be more open to and comfortable with starting to cut rates in the second half of this year.”
High interest has plagued the housing market over the past year, with buyers being put off by more expensive mortgages.
Any hopes of imminent rate cuts have therefore fuelled expectations of further falls in mortgage rates and subsequent returning demand.
Persimmon climbed by 3.7%, followed by Taylor Wimpey and Barratt, which rose by 2.6% and 2.4% respectively.
The news coincided with ONS data showing that house prices fell at a slower rate in the year to December.
Prices fell by 1.4% to £285,000, data showed, compared to 2.3% in November.
“These new results might be an indication that pent-up demand from 2023 could be carrying through to 2024,” Mortgage Advice Bureau director Mobeen Akram said.
“We can see that not only has consumer confidence increased, but also that of housebuilders.”
9.45am: ‘Picture could change’ before BoE’s next rate call - analyst
January’s slightly lower-than-expected inflation provides “a little bit to love” for the Bank of England in determining when base interest could finally be cut, analysts say.
Prices grew by 4% in January, the ONS revealed on Wednesday, in line with December’s inflation and below market expectations of a 4.2% jump.
UK inflation comes on soft, utilities and transport lead the way
Though the figure remains double the Bank of England’s 2% target, Charles Stanley (LSE:CAY) chief analyst Rob Morgan said there were many positives to take from Wednesday’s reading.
Higher energy and airfare costs fuelled the jump, Morgan noted, adding such inflated prices could be temporary.
The data also revealed a fall in food prices, the first decline since 2021, alongside weakness in consumer good prices, Morgan pointed out.
“Interest rate cuts are on their way as the inflation trend is looking favourable,” he commented.
That said, service inflation continues to remain on the “sticky side”, driven in part by wage increases, according to Morgan.
“Overall, there is currently insufficient evidence of a concerted economic weakening that might make the Bank (of England) think about cutting at the next meeting of the monetary policy committee on 21 March,” he added.
“There will be another batch of inflation and other economic data before then, though, so the picture could change.”
9.18am: Ryanair, easyJet, Wizz Air edge higher on Deutsche upgrade
Shares in Ryanair Holdings PLC (LSE:RYA), easyJet PLC and Wizz Air Holdings PLC (AIM:WIZZ) edged higher on Wednesday morning following sweeping upgrades from Deutsche Bank.
Wizz Air was granted a ‘hold’ rating by Deutsche in a Wednesday morning note, up from a ‘sell’ rating previously.
Deutsche highlighted a better-than-expected outlook from Wizz itself over efforts to mitigate the impact of aircraft groundings due to investigations into Pratt & Whitney engine issues.
Resilient demand for intra-European travel into 2024 was also cited, prompting Deutsche to bump up the airline’s share price target from 1,800p to 2,300p, marking a prospective 11.5% jump on Tuesday’s close.
‘Buy’ ratings were held for Ryanair and easyJet meanwhile, with lower than expected fuel costs set to provide tailwinds for each.
Both saw share price targets bumped up as a result, with Deutsche seeing 40% upside in Ryanair stock and growth of 21% for easyJet.
Shares in the trio rose on the news, with Wizz Air up 1.2%, easyJet up 0.7% and Ryanair up 0.3%.
8.50am: The morning so far
The FTSE 100 is up around 32 points to 7,544.53 thanks to a better-than-expected inflation print for January.
The headline figure came in at a flat 4%, equalling December’s print but beating market expectations of a rise to 4.2%.
Transport costs and utilities were the MVPs.
Core inflation – which strips out volatile food and energy costs – also came in slightly softer than expected, at 5.1% instead of 5.2%.
On the company news front, home furnishings mid cap Dunelm Group PLC (LSE:DNLM) hit all targets in its interim earnings call, while Coca-Cola’s FTSE 100-listed packing wing hit record net profits in its annuals.
Today also sees the London Stock Exchange debut of Kazakhstan’s flagship carrier Air Astana.
It marks the first major debut in London for 2024.
Air Astana priced the IPO at 1.073.83 Kazakhstani tenge, or around 189p, per share, giving an implied valuation of more than £670 million for the flagship carrier.
We’ll be sure to keep you posted on how its debut trading session plays out.
Bloomsbury Publishing PLC (LSE:BMY) announced that full-year revenue and profit will come in far ahead of market expectations, which had previously been upgraded in December.
This comes after “exceptional growth” within the firm’s consumer division, driven partially by the release of contracted author Sarah J. Maas’s latest novel in January.
More company and macroeconomic news to come!
8.32am: Coca-Cola’s bottling group hits record profits
Coca-Cola’s FTSE 100-listed packaging wing Coca-Cola HBC AG delivered 16.7% in organic revenue growth to €10.2 billion (£8.7 billion) in the past financial year.
Organic volumes in the core sparkling category were hit by Coca-Cola’s withdrawal from the Russian market, coming in at 2.5%.
However, energy drink volumes surged by over 27% and coffee by over 31%.
Underlying earnings (EBIT) grew 17.7% year on year to €1.1 billion, making for a 9.4% margin.
Comparable earnings per share grew by 21.8% to €2.08, “supported by strong profit delivery and effective management of finance costs”, while net profit after tax of €636.5 was a new record.
“We have delivered a stronger-than-expected financial performance in 2023, despite the significant headwinds to our business,” said the group.
“While we expect the macroeconomic and geopolitical environment to remain challenging, we have high confidence in our 24/7 portfolio and the opportunities for growth in our diverse markets, amplified by our bespoke capabilities, and above all, the talent of our people.
“In 2024 we expect to make progress against our medium-term growth targets.”
Coca-Cola HBG’s outlook for the year ahead has organic revenue growth guidance within the 6-7% medium-term target range and organic EBIT growth in the range of 3% to 9%.
8.07am: Dunelm hits interim targets, raises dividend
Home furnishings retailer Dunelm Group PLC (LSE:DNLM) hit its financial targets in today’s interim results.
Total sales rose by 4.5% to £872 million, up from £835 million in the corresponding period last year.
Growth has been attributed to an increase in active customer numbers by 4.2% and increased market share in both homewares and furniture markets, with a combined gain of 50 basis points.
The retailer has also reported a profit before tax (PBT) increase of 4.8% to £123 million, up from £117 million in the first half of the previous fiscal year thanks to a tight grip on operational costs.
Chief executive Nick Wilkinson commented: "In the past six months, we have kept our customers front of mind, ensuring our broad offer has value at its core whilst also expanding our ranges, introducing new styles, and improving the experience across our store and digital channels.
"This has been particularly important in a more difficult trading environment and has resulted in another strong sales performance combined with market share gains.
“Despite ongoing pressures on consumers, we are encouraged by the wide variety of new customers shopping with Dunelm, and existing shoppers also coming back more frequently.”
The board declared an increased interim ordinary dividend of 16p per share, up from 15p in the first half of 2023.
Dunelm expects full-year PBT to come in line with market expectations of £202 million.
Dunelm shares added 0.4% to 1,089p in opening exchanges.
The FTSE 100 is currently 42 points higher at 7,554.
7.47am: Air Astana takes flight on London Stock Exchange
Kazakhstan's national carrier Air Astana goes live on the Main Market of the London Stock Exchange today under the ticker symbol ‘AIRA’,
It marks the first major debut in London for 2024.
Air Astana priced the IPO at 1.073.83 Kazakhstani tenge, or around 189p, per share, giving an implied valuation of more than £670 million for the flagship carrier.
The offering entails the sale of shares and GDRs held by the Sovereign Wealth Fund Samruk-Kazyna and BAE Systems (Kazakhstan) Limited, in addition to new shares issued by the company.
Proactive will be keeping an eye on how the first day of trading plays out.
7.40: FTSE 100 futures surging, ‘no reason to be pessimistic’ about UK inflation
FTSE futures are surging thanks to this morning’s better-than-expected inflation 4% print for January.
At the latest count, the lead index was predicted to open over 35 points higher at 7,545.
Here's what George Lagarias, chief economist at Mazars, said of the inflation print: "Quite frankly, I see no reason to be pessimistic about UK inflation. While the headline number remained steady at 4%, it was in line with what markets were expecting, mostly because of the year-on-year effect.
"Instead of focusing on the annual number, investors should take a closer look at the monthly figure, which shows that fell by 0.6% in January, the largest drop in a year.
"For the past five months, prices are unchanged on average. If the pace is maintained, in the next four months, we will see much better headline numbers, as we put the high inflation figures from February to May 2023 behind us."
7.25am: Inflation comes in soft
January’s UK inflation print came in at a flat 4% year on year, 20 basis points lower than the 4.2% expected.
Core inflation – which strips out volatile food and energy costs – also came in slightly softer than expected, at 5.1% instead of 5.2%.
This means both metrics were unchanged from December, which itself was close to November’s two-year low of 3.9%.
source: tradingeconomics.com
Price drops for housing and utilities dipped a modest 2.1% compared to December's sharper 3.4% fall, with gas and electricity bills lighting the way.
Transport costs also eased off, down just 0.3% from a previous 1.1% decline.
Meanwhile, the price tag on miscellaneous goods and services ticked up more briskly at 4.5%, slightly higher than the 4.3% before.
Inflation slowed sharply for furniture and household goods, cooling to 0.4% from a hotter 2.5%, and the cost of food and non-alcoholic drinks simmered down to 6.9% from 8.0%.
Though a better-than-expected result all around, it is unlikely to do much for the Bank of England’s stubborn rates policy, given 4% is still double the bank’s 2% inflation target.
FTSE 100 futures bounced higher on the outcome, and is now expected to bounce 29 points higher to 7,537 when markets open.
7.06am: FTSE 100 to open lower again
Futures bids point to the FTSE 100 opening 10 points, or 0.13%, lower when markets open at 8am.
This follows the lead index closing over 60 points lower yesterday.
Equities are feeling pressure following yesterday’s low unemployment figures, which have raised the spectre of a higher-for-longer interest rates situation.
Any minute now, we’ll be getting the January inflation numbers through, which will either support or temper this outlook.
Consensus has the year-in-year rate creeping higher again, from 4% to 4.2%. Undershooting these estimates could provide some support to the equities market in the day ahead.
On the company news front, we’ve got interim results from Dunelm Group PLC (LSE:DNLM), and Pan African Resources PLC (AIM:PAF, OTCQX:PAFRY, JSE:PAN, OTCQX:PAFRF), finals for Coca-Cola HBC AG and a trading update from Severn Trent PLC (LSE:SVT) to cover.