London open: FTSE edges up ahead of US inflation reading; Smiths Group surges

(Sharecast News) - London stocks edged up in early trade on Friday, taking their cue from a positive session on Wall Street, as investors mulled house price data from Nationwide and eyed the latest US inflation reading. At 0825 GMT, the FTSE 100 was up 0.2% at 8,663.20.

Richard Hunter, head of markets at Interactive Investor, said the US personal consumption expenditures report due at 1330 GMT "will provide further colour, with core inflation expected to have risen by 2.5% in the fourth quarter, up from 2.2% in the previous, and representing a gain of 2.8% year on year".

On home shores, data from Nationwide showed that growth in house prices eased in January.

House prices ticked up 0.1% on the month in January following a 0.7% increase in December 2024, missing expectations for 0.3% growth. On the year, house prices rose 4.1% in January following a 4.7% jump the month before.

The average price of a home was £268,213, down from £269,426.

Nationwide chief economist Robert Gardner said: "The housing market continues to show resilience despite ongoing affordability pressures. As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards.

"A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay - well above the long-run average of 30%.

"Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. Consequently, the deposit hurdle remains high.

"This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save."

Alex Kerr, UK economist at Capital Economics, said: "Although the muted 0.1% m/m rise in Nationwide house prices in January was slightly worse than expected (consensus +0.3% m/m, CE forecast +0.2% m/m), it is not too surprising given the rise in quoted mortgage rates at the end of last year. But we doubt that price growth will continue to disappoint and instead think prices will rise by more than most expect this year.

"Looking ahead, house price growth may remain muted over the next few months given that swap rates point to mortgage rates climbing higher. That said, prices may be supported by a potential surge in demand ahead of the expiry of the temporary increase to the stamp duty nil band thresholds after 31st March.

"Either way, our forecast that Bank Rate will be cut from 4.75% now to 3.50% in early 2026, rather than the low of 4.00% that investors currently anticipate, suggests mortgage rates will fall from 4.6% in December to around 4.0% in 2026. That explains our view that house prices will grow by an above-consensus 3.5% in Q4 2025 and 4.5% in Q4 2026."

In equity markets, engineering business Smiths Group surged as it said it was selling its interconnect unit and planned to demerge or offload the detection operation as part of a strategic review that includes extending its share buyback to £500m.

Smiths added that the recent cyber attack was limited to internal enterprise systems, and it had "made good progress in the recovery of these, with most critical systems being back online".

Fashion and homeware retailer Next jumped to the top of the FTSE 100 after an upgrade to 'buy' from 'neutral' at UBS, which said the company was at an "inflection point" when it comes to growth and valuation. The target price was lifted to 11,700p from 10,500p.

On the downside, Sainsbury's fell after a downgrade to 'hold' by HSBC, while Admiral was knocked lower by a downgrade to 'reduce' by Peel Hunt.

Market Movers

FTSE 100 (UKX) 8,663.20 0.19% FTSE 250 (MCX) 20,803.48 -0.01% techMARK (TASX) 4,737.51 -0.16%

FTSE 100 - Risers

Next (NXT) 9,950.00p 1.78% BAE Systems (BA.) 1,224.50p 1.32% Rolls-Royce Holdings (RR.) 602.80p 1.14% Melrose Industries (MRO) 612.80p 0.89% Scottish Mortgage Inv Trust (SMT) 1,081.50p 0.89% Mondi (MNDI) 1,243.50p 0.85% CRH (CDI) (CRH) 8,048.00p 0.83% Alliance Witan (ALW) 1,318.00p 0.76% Shell (SHEL) 2,680.50p 0.66% F&C Investment Trust (FCIT) 1,180.00p 0.51%

FTSE 100 - Fallers

Sainsbury (J) (SBRY) 253.80p -1.70% Fresnillo (FRES) 704.00p -1.19% Admiral Group (ADM) 2,681.00p -0.96% Rightmove (RMV) 659.80p -0.84% SEGRO (SGRO) 715.60p -0.80% Flutter Entertainment (DI) (FLTR) 21,680.00p -0.78% Auto Trader Group (AUTO) 789.00p -0.75% Persimmon (PSN) 1,259.50p -0.75% Taylor Wimpey (TW.) 120.05p -0.74% Barratt Redrow (BTRW) 456.50p -0.72%

FTSE 250 - Risers

Baltic Classifieds Group (BCG) 358.00p 4.68% Bloomsbury Publishing (BMY) 680.00p 3.98% CMC Markets (CMCX) 236.00p 3.74% Quilter (QLT) 165.40p 2.41% Balfour Beatty (BBY) 467.80p 1.65% FirstGroup (FGP) 163.40p 1.36% Ocado Group (OCDO) 308.00p 1.25% Oxford Nanopore Technologies (ONT) 146.40p 1.10% IntegraFin Holding (IHP) 367.00p 1.10% Wood Group (John) (WG.) 68.90p 0.95%

FTSE 250 - Fallers

Petershill Partners (PHLL) 259.50p -4.77% Oxford Instruments (OXIG) 1,996.00p -4.73% XPS Pensions Group (XPS) 330.00p -4.35% Foresight Group Holdings Limited NPV (FSG) 375.00p -2.85% Mony Group (MONY) 188.10p -2.54% Ashmore Group (ASHM) 163.80p -2.21% Hilton Food Group (HFG) 860.00p -1.71% Jupiter Fund Management (JUP) 77.70p -1.27% Ferrexpo (FXPO) 109.00p -1.27% Kier Group (KIE) 148.00p -1.20%