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(Alliance News) - UK inflation soared to a near 30-year high in December, data showed on Wednesday, with all eyes now on the Bank of England's meeting at the start of next month.
The consumer price index rose 5.4% year-on-year in December, accelerating from 5.1% in November. This topped market forecasts of 5.2%.
"This is the highest CPI 12-month inflation rate in the National Statistic data series, which began in January 1997, and it was last higher in the historical modelled data series in March 1992, when it stood at 7.1%," the Office for National Statistics said.
Pushing up the index were prices for second hand cars, jumping 29% after a rise of 27% in November, while food price inflation accelerated to 4.5% from November's 2.4%. Growth in prices of clothing & footwear ticked up to 4.2% from 3.5%.
Encouragingly, while prices of fuels & lubricants grew a heady 27% in December, this was slowed from 29% in November, and electricity price growth was steady at 19%.
"As wholesale gas prices have again moved sharply higher in recent months, inflation seems set to move well above 6% in April when the energy price cap next changes," commented analysts at Lloyds Bank.
"The consensus expectation is still that, following a spring peak, inflation will start to decelerate but that depends upon several factors including that labour costs remain relatively contained."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "We're bringing forward our forecast for the next increase in [the UK] Bank Rate to February, from March, following December's consumer prices figures."
Marc Kimsey, an equity trader at Frederick & Oliver, said a February rate increase by the BoE now is "inevitable".
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: marginally lower, down 2.61 points at 7,560.94
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Hang Seng: down 0.2% at 24,072.84
Nikkei 225: closed down 2.8% at 27,467.23
S&P/ASX 200: closed down 1.0% at 7,332.50
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DJIA: closed down 543.34 points, or 1.5%, at 35,368.47
S&P 500: closed down 85.74 points, or 1.8%, at 4,577.11
Nasdaq Composite: closed down 386.86 points, or 2.6%, at 14,506.90
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EUR: flat at USD1.1337 (USD1.1335)
GBP: up at USD1.3597 (USD1.3583)
USD: down at JPY114.41 (JPY114.61)
Gold: down at USD1,811.81 per ounce (USD1,812.88)
Oil (Brent): up at USD87.83 a barrel (USD87.22)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's key economic events still to come
1000 CET France IEA oil market report
1100 CET EU construction output
0930 GMT UK house price index
1100 GMT Ireland consumer price index
1415 GMT UK BoE Governor Andrew Bailey appears before Treasury Committee
0700 EST US MBA weekly mortgage applications survey
0830 EST US housing starts
1630 EST US API weekly statistical bulletin
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UK Prime Minister Boris Johnson is set to face an increasingly angry chorus of his own MPs amid reports the 54 letters which would launch a no confidence vote in the PM could be received on Wednesday. Reports on Tuesday night suggested MPs furious at Johnson's handling of the partygate scandal engulfing Westminster had been angered further by Johnson's insistence that nobody had told him a party at Downing Street would break rules he himself had set. And that especially those in the 2019 intake, many of whom have slim majorities after votes were "lent" to them during the last election, were preparing to submit their letters to the chair of the 1922 Committee of backbench members of Parliament, Graham Brady. An expected announcement that Plan B measures to stem the spread of coronavirus will be lifted next week is likely to please some backbenchers.
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German inflation was confirmed accelerating to 5.3% in December on an annual basis, official figures showed. This marked an uptick from November's inflation rate of 5.2%. On a harmonised basis, calculated for comparative purposes across the EU, prices grew 5.7% year-on-year, confirming the initial figure. December's statistics mean the average annual inflation rate in Germany throughout 2021 was 3.1%, the highest since 1993's 4.5%. In 2020, this had been just 0.5%.
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US Secretary of State Antony Blinken landed in Kyiv on Wednesday for crisis talks with Ukraine's leaders, as diplomatic efforts to dissuade Russia from attacking its pro-Western neighbour falter. After talks last week failed to ease fears, the White House warned Tuesday that Russia was ready to attack Ukraine at "any point". It was a marked intensification of its threat assessment ahead of a meeting between Blinken and Russian Foreign Minister Sergei Lavrov expected in Geneva on Friday. Hoping to show robust support ahead of the talks, the top US diplomat is making a one-day visit to Kyiv in a show of support for Ukraine. He was greeted by Ukrainian officials on an icy moonlit tarmac and will later meet President Volodymyr Zelensky. Blinken heads Thursday to Berlin for four-way talks with Britain, France and Germany to seek Western unity.
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BROKER RATING CHANGES
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RBC cuts Smiths Group to Sector Perform (Outperform) - price target 1,675 (1,610) pENCE
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JPMorgan raises Segro to Overweight (Neutral) - price target 1,450 (1,310) pence
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Goldman Sachs cuts ASOS to Neutral (Buy) - price target 2,750 (3,300) pence
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COMPANIES - FTSE 100
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Burberry reported third-quarter sales growth and said it sees a softer-than-anticipated currency headwind for the full year. Retail revenue amounted to GBP723 million in the 13 weeks to December 25, up 5% from GBP688 million a year prior. Full-price comparable store sales rose 15% year-on-year, with all comparable store sales up 7%. On two years prior, being before the impact of the pandemic, full-price comparable store sales were up 26% but all comparable store sales down 3%. Looking ahead, Burberry expects full-year adjusted operating profit to grow in the region of 35% at constant exchange rates. In addition, the currency headwind is now expected to be GBP79 million on revenue, down from around GBP100 million, and GBP27 million on adjusted operating profit, down from GBP40 million.
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Pearson said it made "great progress" in the fourth quarter, leading to a better-than-expected full-year outturn. Full-year sales were up 8% and the education publisher expects adjusted operating profit of GBP385 million, up 33% on the year before and ahead of consensus at GBP375 million. "Led by a strong management team, we are repositioning the business, driving digital innovation and an increased focus on the consumer through the launch of Pearson+. We are well placed to build on this momentum in the year ahead and look to the future with confidence," said Chief Executive Andy Bird.
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BHP released some uninspiring production figures, with everything from maintenance issues to Covid-induced labour shortages to wet weather hurting output in its first half of its financial year. In the six months to December 31, copper production fell 12% year-on-year to 742,000 tonnes while the metal's average realised price rose 30% to USD4.31 per pound. The fall in production was due to maintenance at Olympic Dam in Australia. Iron ore production rose 0.8% to 129.4 million tonnes. The average price booked in the half was USD113.54 per wet metric tonne, up 9% to a year prior but down 28% compared to the six months ended June 30, 2021. Looking ahead, BHP left its financial 2022 production guidance unchanged for iron ore, energy coal and nickel. But BHP lowered its metallurgical coal guidance to between 38 and 41 million tonnes from 39 to 44 million. The miner also said its copper production outlook is trending towards low end of its guidance range, which is set between 1.6 and 1.8 million tonnes.
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COMPANIES - FTSE 250
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Pub operator JD Wetherspoon said it will post a first-half loss but is hoping for a "much stronger" performance in the second half of its financial year as virus restrictions ease. In the 25 weeks to January 16, like-for-like sales were down 12% and total sales fell 13% against the same period in the 2020 financial year. Second quarter sales were hit by the UK government's Plan B coronavirus restrictions in England, the firm said. "As mentioned in our update on 13 December 2021, the uncertainty created by the introduction of plan B Covid-19 measures makes predictions for sales and profits hazardous," said Wetherspoon Chair Tim Martin.
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COMPANIES - GLOBAL
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Microsoft's USD69 billion deal to buy video game powerhouse Activision Blizzard is expected to win out with regulators despite vows in Europe and the US to rein in tech titans. Analysts interviewed by AFP after the merger plan was announced on Tuesday said the deal would certainly be scrutinized, but likely less intensely than would an acquisition by Amazon.com, Google-parent Alphabet, or Facebook-parent Meta Platforms. "From a regulatory perspective, Microsoft is not under the same level of scrutiny as other tech stalwarts," said Wedbush analyst Dan Ives. Regulators might even see value in Microsoft challenging video game industry heavyweight Tencent, which is based in China, analysts contended.
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Wednesday's shareholder meetings
Diploma PLC - AGM
Majedie Investments PLC - AGM
Topps Tiles PLC - AGM
Troy Income & Growth Trust PLC - AGM
WH Smith PLC - AGM
Zoltav Resources PLC - GM re delisting
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By Tom Waite; thomaslwaite@alliancenews.com
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