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London close: Stocks gain as Wall Street surprises, rising after CPI report

Wed, 14th Feb 2018 17:06

(ShareCast News) - London equity markets finished near their best levels of the session on Wednesday, after an unexpectedly strong reading on US consumer prices failed to knock Wall Street lower, arguably the biggest surprise of the session.

At the closing bell, the FTSE 100 was up 0.64% to 7,213.97, alongside a 0.49% jump in the pound to 1.3955 US dollars, partly on the heels of a speech from the Chancellor highlighting that a transition period following Brexit was in the best interests of both Brussels and London.

Also worth noting, the Bank of England's summary of Agents' summary of business conditions showed recruitment difficulties were continuing, alongside a pick-up in wage growth.

Over in the States, the Bureau of Labor Statistics reported that US consumer prices printed at up by 2.1% year-on-year for January, unchanged from the month before but ahead of economists' forecasts calling for a dip to 2.0%.

Thursday's CPI surprise in the States was all the more surprising given recent revisions to the so-called seasonal adjustment factors for that report, which had been expected to contribute to a fall.

Nonetheless, in reaction to that inflation data, Ian Shepherdson at Pantheon Macroeconomics said: "Coming so soon after the out-sized Jan wages numbers, it will be easy for inflation bears to spin a story of rising wage gains lifting inflation.

"That's a premature judgement, not least because just two components - apparel and medical services - account for the overshoot against consensus."

Nevertheless, all told he believed the underlying trend was at roughly 0.2% per month, although that meant CPI would gradually move towards 2.5%, which was consistent with 'core' PCE (the Fed's preferred price gauge) to 2.0% year-on-year.

"[...] likely rather quicker than the Fed and the markets expect. This report does not constitute an inflation disaster, but it's clearly a threat to markets which still don't fully price-in the three hikes the Fed expects; we think four are more likely," Shepherdson added.

On a slightly discordant note, and despite early gains on Wall Street, the Japanese yen, widely considered a gauge of risk aversion, was at 15-month highs against the US dollar.

In corporate news, Coca Cola HBC rallied as it reported full year earnings before interest and tax (EBIT) of 621m, a rise of 20% on net sales revenue of 6.5bn, up 4.9%.

Sky and BT were also both on the front foot as they picked up the rights to the Premier League for 4.46bn.

Engineer GKN, which is currently fighting off a hostile bid from turnaround specialist Melrose Industries, was in the black after saying it is targeting a cash return of up to 2.5bn to shareholders over the next three years.

The knock-on effects of Carillion's collapse were being felt as Galliford Try tumbled after announcing a 150m capital raising to cover the impact. The announcement came alongside the firm's latest interims and a decision to pay out a dividend of 28p for the six months to 31 December, versus 32p in the first half of 2017.

However, Serco advanced after saying it has signed a revised purchase agreement with Carillion's liquidators allowing it to buy some of Carillion's UK healthcare facilities management business for 29.7m, down from a previously agreed price of 47.7m.

Sirius Minerals gained after entering into a design and build contract with shaft sinking and mining contractor DMC Mining Services for the construction of the four shafts required for its polyhalite project in North Yorkshire.

Spirax-Sarco Engineering nudged up after it said chairman Bill Whiteley plans to retire from the board in May, and will be succeeded by senior independent director Jamie Pike.

CYBG was boosted by an upgrade to 'sector perform' at RBC Capital Markets, but Virgin Money was hit by a downgrade to 'underperform' by the same outfit.

Aviva was higher after an upgrade to 'buy' at Goldman Sachs, while TalkTalk edged up after an upgrade to 'hold' at Societe Generale.

AG Barr slid after JPMorgan cut the stock to 'underweight'.

Market Movers

FTSE 100 (UKX) 7,213.97 0.64%

FTSE 250 (MCX) 19,448.38 0.66%

techMARK (TASX) 3,260.68 0.52%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 6,386.00p 4.86%

Coca-Cola HBC AG (CDI) (CCH) 2,346.00p 4.83%

Fresnillo (FRES) 1,331.00p 4.60%

Evraz (EVR) 375.30p 4.08%

WPP (WPP) 1,384.00p 3.63%

GKN (GKN) 411.30p 3.34%

Old Mutual (OML) 239.40p 3.01%

Antofagasta (ANTO) 916.00p 2.97%

ITV (ITV) 165.05p 2.96%

BHP Billiton (BLT) 1,574.60p 2.81%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 1,539.50p -4.58%

Standard Life Aberdeen (SLA) 390.10p -2.38%

Shire Plc (SHP) 3,135.50p -1.43%

CRH (CRH) 2,434.00p -1.30%

Reckitt Benckiser Group (RB.) 6,323.00p -0.96%

Rolls-Royce Holdings (RR.) 820.60p -0.80%

Hammerson (HMSO) 459.80p -0.73%

Sainsbury (J) (SBRY) 245.60p -0.73%

Morrison (Wm) Supermarkets (MRW) 217.40p -0.60%

Barratt Developments (BDEV) 547.80p -0.58%

FTSE 250 - Risers

Provident Financial (PFG) 709.00p 8.51%

Convatec Group (CTEC) 198.45p 5.47%

Ferrexpo (FXPO) 284.60p 4.58%

Hikma Pharmaceuticals (HIK) 893.20p 4.39%

Merlin Entertainments (MERL) 335.10p 4.31%

Melrose Industries (MRO) 221.50p 4.24%

Serco Group (SRP) 86.95p 4.07%

IWG (IWG) 242.20p 4.04%

TBC Bank Group (TBCG) 1,650.00p 4.04%

Polymetal International (POLY) 789.20p 3.95%

FTSE 250 - Fallers

Galliford Try (GFRD) 800.00p -18.99%

Virgin Money Holdings (UK) (VM.) 259.90p -4.18%

Sanne Group (SNN) 612.00p -3.79%

NewRiver REIT (NRR) 294.50p -3.12%

Kier Group (KIE) 1,052.00p -3.03%

Vectura Group (VEC) 76.00p -2.69%

St. Modwen Properties (SMP) 383.00p -2.58%

Go-Ahead Group (GOG) 1,369.00p -2.56%

Hansteen Holdings (HSTN) 130.60p -2.47%

Barr (A.G.) (BAG) 642.10p -2.42%

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