London close: Stocks firmer after UK, US inflation data

(Sharecast News) - London's stock markets closed significantly higher on Wednesday, buoyed by positive inflation data from both sides of the Atlantic.

The FTSE 100 index climbed 1.21% to 8,301.13 points, while the FTSE 250 surged 2.87% to close at 20,333.62 points.

In currency markets, sterling was last down 0.12% on the dollar to trade at $1.2200, while it gained 0.26% against the euro, changing hands at €1.1882.

"After a shaky start to the year stocks seem to have found their footing, helped in a big way by today's US inflation and earnings data," said IG chief market analyst Chris Beauchamp.

"Yesterday's PPI data in the US raised the prospect that today's figures wouldn't come in too hot, and while the headline figures were slightly higher, the key core figures delivered the good news.

"Investors can live with a cautious Fed so long as inflation remains contained."

Beauchamp said the fresh consumer inflation data on Wednesday seemed to support that thesis, and had seen risk appetite switch firmly back to bullish.

"Today's UK inflation data was also good news for hard-pressed FTSE stocks, and there was plenty of interest in the FTSE 250 and its UK-focussed names.

"After the unrelenting parade of bad news on the UK economy, today's figures are a welcome change.

"The problems remain however, but for now the bond vigilantes, and their equity market cousins, have gone quiet."

Core inflation undershoots stateside, UK inflation unexpectedly falls

In economic news, the cost of living in the United States accelerated more than expected in December, driven by a sharp increase in energy prices.

The consumer price index (CPI) rose 0.4% month-on-month, pushed higher by a 4.3% surge in petrol costs, according to the Department of Labor.

On an annual basis, headline inflation climbed to 2.9% from 2.7% in November, surpassing the 2.8% consensus forecast.

However, core inflation, which excludes volatile food and energy prices, undershot expectations, rising 0.2% on the month and 3.2% year-on-year compared to a forecast for 3.3%.

Notable gains were seen in new vehicle prices, up 0.5%, and used cars and trucks, which rose 1.2%.

Shelter prices maintained a steady 0.3% monthly increase, while medical care services rose by a modest 0.2%.

On home shores, UK inflation eased unexpectedly in December after two consecutive monthly increases.

Data from the Office for National Statistics showed consumer price inflation slowing to 2.5% from 2.6% in November, defying expectations of no change.

Core inflation also declined more than forecast, falling to 3.2% from 3.5%, against predictions of a smaller drop to 3.4%.

Services inflation moderated to 4.4%, down from 5%, marking a sharper decline than economists had anticipated.

"Inflation eased very slightly as hotel prices dipped this month, but rose a year ago," said ONS economist Grant Fitzner.

"The cost of tobacco was another downward driver, as prices increased by less than this time last year.

"This was partly offset by the cost of fuel and also second-hand cars, which saw their first annual growth since July 2023."

Meanwhile, UK house prices continued to rise, reflecting strong demand for property.

The average house price increased by 3.3% year-on-year in November, reaching £290,000, compared to a 3.0% gain in October, according to the ONS.

Scotland led the growth, with prices jumping 4.7% to an average of £195,000.

England and Wales saw increases of 3%, bringing average prices to £306,000 and £219,000, respectively.

On the continent, industrial production in the eurozone in November rose slightly by 0.2% month-on-month but fell 1.9% year-on-year.

The broader European Union recorded a 1.7% annual decline.

Germany, the region's largest economy, meanwhile posted its second consecutive annual economic contraction.

Official data from Destatis revealed a 0.2% GDP decline in 2024, following a 0.3% drop in 2023.

Manufacturing and construction were particularly hard-hit, with gross value added falling 3.0% and 3.8%, respectively.

Key sectors, including automotive and energy-intensive industries such as chemicals and metalworking, faced significant challenges due to elevated energy costs, persistent inflation, and higher interest rates.

The construction sector struggled as rising borrowing costs curtailed new residential projects.

Housebuilders, banks rise on fresh rate cut hopes

On London's equity markets, housebuilders and banks were among the gainers on Wednesday, buoyed by optimism that easing inflation could prompt an interest rate cut as early as February.

Taylor Wimpey, Persimmon, Barratt Redrow, and Berkeley Group all posted substantial gains, with Taylor Wimpey leading the sector at a 4.81% rise.

Among banks, Barclays and Lloyds Banking Group both climbed by over 6%, while NatWest Group advanced 5%.

Elsewhere, animal genetics firm Genus surged 22.47% after announcing it expected full-year adjusted pre-tax profit to reach the upper end of market forecasts following a robust first half.

Consensus estimates put profits between £63m and £67.4m.

Currys also impressed, jumping 10.73% after raising full-year profit guidance, supported by a 2% increase in UK underlying sales during the Christmas and Black Friday periods, driven by strong demand for laptops and mobile phones.

Other notable performers included Diploma, up 5.29% following a strong first-quarter update, and Unite Group, which gained 4.19% after Goldman Sachs initiated coverage with a 'buy' rating, citing solid fundamentals.

Severn Trent advanced 5.18% after JPMorgan Cazenove named it its 'top pick' in the sector, highlighting its "sector-leading" performance and growth prospects.

Mitchells & Butlers, Ashmore Group, Just Group, and Vistry also saw strong gains following upbeat trading updates, while energy services group DCC rose 3.07% after an upgrade to 'outperform' at RBC Capital Markets.

Recruitment firm Hays gained 3.18% despite reporting a decline in second-quarter net fees and warning of subdued trading conditions.

In contrast, miner Anglo American fell 0.97% after RBC Capital Markets downgraded the stock to 'underperform' from 'sector perform,' citing a residual bid premium following BHP's previous takeover approach and lowering its price target to 2,200p from 2,400p.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,301.13 1.21% FTSE 250 (MCX) 20,333.62 2.87% techMARK (TASX) 4,619.90 2.15%

FTSE 100 - Risers

Lloyds Banking Group (LLOY) 57.12p 6.53% Barclays (BARC) 280.95p 6.50% St James's Place (STJ) 880.50p 6.21% Diploma (DPLM) 4,298.00p 5.29% Severn Trent (SVT) 2,459.00p 5.18% NATWEST GROUP (NWG) 405.20p 5.00% Taylor Wimpey (TW.) 114.35p 4.81% Land Securities Group (LAND) 557.00p 4.60% United Utilities Group (UU.) 980.00p 4.52% Whitbread (WTB) 2,972.00p 4.50%

FTSE 100 - Fallers

Anglo American (AAL) 2,448.00p -0.97% Reckitt Benckiser Group (RKT) 4,821.00p -0.86% Imperial Brands (IMB) 2,580.00p -0.58% Melrose Industries (MRO) 556.80p -0.54% Rolls-Royce Holdings (RR.) 563.40p -0.53% Unilever (ULVR) 4,464.00p -0.36% InterContinental Hotels Group (IHG) 10,040.00p -0.30% Flutter Entertainment (DI) (FLTR) 21,410.00p -0.28% British American Tobacco (BATS) 2,908.00p -0.27% Haleon (HLN) 367.00p -0.03%

FTSE 250 - Risers

Genus (GNS) 1,744.00p 22.47% Vistry Group (VTY) 595.50p 15.74% Currys (CURY) 90.80p 10.73% Bakkavor Group (BAKK) 143.00p 9.58% Bellway (BWY) 2,366.00p 7.64% Elementis (ELM) 145.60p 7.37% Just Group (JUST) 154.80p 7.05% Ocado Group (OCDO) 316.30p 6.97% Bridgepoint Group (Reg S) (BPT) 363.80p 6.87% Mitchells & Butlers (MAB) 243.50p 6.80%

FTSE 250 - Fallers

Endeavour Mining (EDV) 1,487.00p -1.72% BH Macro Ltd. GBP Shares (BHMG) 407.00p -1.09% Edinburgh Worldwide Inv Trust (EWI) 194.80p -0.51% Renewi (RWI) 800.00p -0.12% Tami Senior Securitisation 2 Ltd Cls A-2 Mb Fxd Rte Nts 31/12/23 (Reg S) (BP00) 0.00p 0.00% Britvic (BVIC) 1,312.00p 0.00% TI Fluid Systems (TIFS) 193.80p 0.00% Hargreaves Lansdown (HL.) 1,102.00p 0.05% Mony Group (MONY) 187.10p 0.05% Spirent Communications (SPT) 174.30p 0.06%