AGK.L Share News (AGK)

LONDON (Alliance News) - London stocks closed higher Tuesday, supported by the continued march of oil prices towards USD50 a barrel and by some well-received reporting by FTSE 350 companies. Some of the gains made in early trading were erased after a report of feeble UK inflation pressure, however.

Inflation readings from the UK and US headed in opposite directions in April.

Data from the UK Office for National Statistics showed annual consumer inflation eased to 0.3% in April, compared to economist expectations for an unchanged rate of 0.5%. UK consumer prices rose 0.1% from the month before, against a 0.3% month-on-month rise in March, again missing forecasts for 0.3%.

Factory gate prices decreased 0.7% on a yearly basis in April, the ONS data showed. This was compared to a 0.9% drop in March and a 0.8% decline forecast by economists.

Spreadex financial analyst Connor Campbell said the inflation figures don't provide Bank of England policymakers "anything new to work with", particularly considering the central bank is "stuck in wait-and-see mode ahead of the EU referendum at the end of June."

In the US, on the other hand, consumer prices recorded their biggest increase in more than three years in April.

The US Labor Department said its CPI index rose 0.4% in April year-on-year, the largest gain since February 2013, having risen just 0.1% in March. This compares to economist expectations for a 0.3% rise. For the year to the end of March, US CPI grew 1.1%, broadly in line with economist expectations.

Wall Street was lower at the London close, having ended the day higher on Monday. The Dow Jones Industrial Average was down 0.4%, the S&P 500 index down 0.3% and the NASDAQ Composite down 0.3%.

That fact that inflation beat consensus is likely to increase expectations of an earlier interest rate hike by the US Federal Reserve, but Dennis de Jong, managing director of UFX.com, said the inflation data is unlikely to push Fed Chair Janet Yellen into another rate hike any time soon. He said the US economy has been on a "see-saw" in recent weeks, with bad data interspersed with good.

"A smoother economic road, with most of the bumps ironed out, is what Yellen and her colleagues will be looking for before continuing with their plan to gradually raise rates," de Jong predicted.

Capital Economics US economist Steve Murphy agreed, saying the probability of a US rate hike is now "probably less than 50:50". However, with domestic price pressures increasing, he said rising inflation is likely to drive up the pace of rate hikes significantly in 2017.

US industrial production also bounced back in April, according to a Federal Reserve report. Industrial production grew 0.7% in April year-on-year, having fallen 0.9% in March, well ahead of the 0.2% growth expected by economists.

The dollar failed to get any boost from the inflation numbers, as the pound and euro had a strong day. Fawad Razaqzada, market analyst at City Index, said sterling held on to gains made earlier in the day by polling which showed the Remain camp firmly in the lead ahead of the European Union referendum in the UK next month.

"Clearly, traders are putting more weight towards changes in the probability of Brexit than those in domestic economic data, at least when it comes to trading the pound," he said. The pound was quoted at USD1.4478 at the London equities close, compared to USD1.4399 at the close on Monday, while the euro was trading at USD1.1337, up from USD1.1329.

Oil continued its recent rise, having fluctuated throughout the day on profit-taking. Late in London, Brent was trading at USD49.29 per barrel, up from USD49.02 at the stock-market close on Monday and its highest level since early November, despite pulling back from intraday highs of USD49.44. Oil has been boosted by unexpected supply disruptions in Nigeria, Canada and Venezuela recently, plus stronger demand from India, China and Russia, which was highlighted in a Goldman Sachs report.

Gold was up at USD1,280.36 an ounce at the London equities close, compared to USD1,274.99 on Monday.

The FTSE 100 closed up 0.3%, or 16.37 points, at 6,167.77, slightly off highs reached earlier in the day due to the weak inflation numbers. At the open Tuesday, the blue-chip index had been up 0.8%. The FTSE 250 closed up 0.9%, or 145.76 points, at 16,845.08, while the AIM All-Share closed up 0.2% or 1.74 points at 726.08.

The FTSE 100 risers were dominated by companies receiving a good market response to trading and earnings updates. Taylor Wimpey rose 4.7% after the housebuilder raised its medium-term financial targets and upgraded its dividend policy given the "positive" state of the UK's housebuilding industry at present.

Taylor Wimpey said the healthy and controlled lending environment was providing good accessibility to mortgages at competitive rates, whilst consumer demand and confidence remain high. This optimism on the UK housing market meant shares in Taylor Wimpey's blue-chip rivals benefited as well, with Berkeley Group Holdings up 2.5% and Barratt Developments up 2.4%.

Also amongst the risers was DCC, the Irish distribution and outsourcing business, up 3.8% after it smashed through consensus expectations for the financial year to the end of March, delivering 47% growth in pretax profit, hiking its dividend and pointing to another year of growth ahead.

Vodafone Group, the mobile telecoms giant, rose 2.4% after also paying out more and guiding to earnings growth in the year ahead. The group, which said it will switch to reporting in euros in the current financial year, added it returned to organic earnings growth for the first time in eight years in the financial year to the end of March.

Vodafone also said it has completed its GBP7.0 billion Project Spring investment programme and had delivered on "almost all" of the major targets it had outlined, including extending its European 4G and fibre coverage.

Equipment rental company Ashtead finished up 4.3% after Exane BNP Paribas upgraded its rating on the firm to Outperform from Neutral following a recent decline in its share price. Exane said it still thinks Ashtead it set for a year of growth in the financial year to the end of April 2017, despite growing concerns on its outlook.

In the FTSE 250, car dealer Lookers was the biggest gainer, up 5.9% after first quarter trading indicated the group will meet market expectations for 2016, which would represent a big step-up in earnings compared to 2015. Lookers said gross profit from its new cars, used cars and aftersales businesses all grew in the first quarter, both on a total and like-for-like basis as it continues to benefit from a very strong car market in the UK.

Broker rating changes had an impact at both ends of the mid-cap index. Temporary power company Aggreko, up 5.5%, was boosted by Bank of America Merrill Lynch upgrading it to Buy from Neutral. The bank said this is based on an anticipated inflection point for Aggreko's utilities business in 2017 which leaves risks skewed to the upside on the shares.

On the flip side, Halma, which makes safety and detection products, was down 2.5% after UBS argued the quality of the company's earnings are more than priced into the shares. Halma is currently trading at 17x 2017 enterprise value-to-earnings before interest, tax and amortisation, a 49% premium to the sector and a 25-year high for the business, UBS said, and with any upside more than priced in, risks are to the downside.

Beyond the FTSE 350, housing maintenance contractor Lakehouse sank 29% after it issued a profit warning for the year to the end of September,amid challenges facing its divisional operations and following a shake-up of its board in the first half after a battle with activist shareholders. Lakehouse said its Regeneration arm, which handles refurbishment, repair and maintenance work for social housing customers, had experienced "much more difficult trading conditions" in the first half to the end of March than expected.

In Paris, the CAC 40 closed down 0.3% and the DAX in Frankfurt fell 0.6%. European stocks had touched two-week highs earlier in the day, but this was reversed later on Tuesday, hit by falling automotive sector shares.

In the economic calendar Wednesday, UK unemployment and average earnings are scheduled for 0930 BST, followed by Eurozone consumer prices at 1000 BST. Prior to this, Japanese gross domestic product is due overnight, as are Chinese house prices.

Highlighting corporate reporting in London on Wednesday, luxury goods retailer Burberry Group will post full-year results, as will brewing giant SABMiller and power company SSE.

Pub operator Marston's and retail concessions operator SSP Group publish interim results, while events company UBM, property investor CLS Holdings, concrete paving maker Marshalls and wealth manager Rathbone Brothers all provide trading updates.

Healthcare property investor Assura issues annual results, while housebuilder and regeneration company Countryside Properties and Patisserie Valerie-owner Patisserie Holdings report half-year results.

By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance

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