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(Alliance News) - Stocks in London ended mixed on Thursday as US consumer price inflation picked up at its fastest pace for 13 years, fuelling fears the economy could overheat and lead the Federal Reserve to rein in pandemic support.
The US consumer price index surged 5.0% in May, marking an uptick form 4.2% in April and ahead of market expectations, according to FXStreet, of 4.7%. May's reading marked the largest 12-month increase since a 5.4% rise for the period ending August 2008.
Month-on-month, prices rose 0.6% in May after rising 0.8% in April. The index for used cars and trucks continued to rise sharply, the Bureau of Labor Statistics noted, rising 7.3% in May.
"Yet another big upside surprise for US inflation casts further doubt on the Fed's claim that this is all 'transitory' and monetary policy can be left ultra-loose for the next three years. We expect to hear a shift in the Fed's language over the late summer," analysts at ING commented.
The FTSE 100 index closed up 7.17 points, or 0.1%, at 7,088.18. The FTSE 250 ended down 150.21 points, or 0.7%, at 22,608.76. The AIM All-Share closed 4.07 points lower, or 0.3%, at 1,245.49.
The Cboe UK 100 ended flat at 706.00, the Cboe UK 250 closed 0.8% lower at 20,353.20 and the Cboe Small Companies ended down 0.3% at 15,28.00.
In Paris the CAC 40 ended down 0.3%, while the DAX 30 in Frankfurt ended flat.
CMC Markets analyst Michael Hewson said: "It's been another slow day for markets in Europe, with the FTSE100 again outperforming, but still failing to gain traction above the recent highs near 7,120. The rest of Europe has struggled to make any semblance of progress into positive territory, although the losses are minor, just shy of record highs.
"The UK index has been helped by outperformance in the telecoms sector with BT Group shares surging higher after French multinational telecoms company Altice announced it had taken a 12% stake in the business. The company which owns a range of assets including French mobile phone operator SFR said it doesn't intend to make a bid for the business, with the UK stake being run as a separate business, Altice UK."
On the London Stock Exchange, BT Group ended the second-best performer, up 6.6%, after Altice UK, a new company wholly owned by billionaire Altice Europe founder Patrick Drahi, said it has bought a 12% stake in the former state monopoly.
BT is in a position to "deliver one of the UK government's most important policies" in expanding broadband networks, and benefits from a regulatory framework which offers it incentives to invest, Altice UK said.
Drahi's company said it holds BT's management in high regard and supports their strategy. It does not intend to make an offer for the whole company, a binding statement under UK takeover rules.
Auto Trader ended the best blue-chip performer, up 7.2%, even as the digital automotive marketplace posted a substantial drop in annual earnings and revenue but gave an optimistic outlook as it highlighted growth in its online business and "record levels" of customers.
Auto Trader posted a 29% fall in revenue to GBP262.8 million for the financial year that ended March 31 from GBP368.9 million. Trade revenue declined 31% to GBP225.2 million following a decision to provide free advertising to retailer customers in April, May, December and February and at a discounted rate in June.
Auto Trader's pretax profit slumped 27% to GBP157.4 million.
However, Auto Trader has decided to reinstate its capital allocation policy and proposed a final dividend of 5.0 pence, versus no payout a year ago. With no interim dividend, this 5p will be the total dividend for the year, up from 2.4p the year before.
Looking ahead, Auto Trader said it has started the new financial year in a strong position, it said, and expects to deliver deliver high single digit growth on the average revenue per retailer achieved in the 2020 financial year - meaning two years prior - with operating profit margins in line with 2020 levels.
At the other end of the large-caps, J Sainsbury closed down 3.0% after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.
In the FTSE 250, Mitie Group ended the best performer, up 5.9%, after the facilities management company swung to an annual loss but forecast its future performance to be better than original expectations following new contract wins.
The Glasgow-based company posted a pretax loss of GBP9.1 million for the financial year that ended March 31, swung from a GBP48.4 million profit the year before. The substantial earnings decline was attributed by Mitie to reduced project work and lower demand for core facilities management due to the pandemic.
Mitie described "good trading resilience" through the pandemic, with its Interserve Facilities Management acquisition performing better than expected and achieving GBP6.2 million in cost and revenue synergies in financial year 2021. The services arm of Interserve was bought by Mitie for GBP271 million in cash and shares in November.
Looking ahead, Mitie said its outlook for financial year 2022 was anticipated to be "materially ahead" of prior expectations.
CMC Markets closed up 1.7% after he online spread betting firm reported a second year of record profit as surging clients numbers boosted trading income, leading to a sharp dividend hike.
In the financial year that ended March 31, CMC's pretax profit more than doubled to GBP224.0 million from GBP98.7 million the year before. Profit after tax surged to a consecutive annual record of GBP178.1 million from GBP86.9 million the year before.
Net operating income jumped 63% year on year to GBP409.8 million from GBP252.0 million.
CMC doubled its shareholder payout as a result of the surging profit. The annual dividend was improved to 30.6 pence from 15.0p in financial 2020, following the declaration of a 21.43p final payout. CMC said it remains committed to paying a total dividend of 50% of profit after tax.
Stocks in New York were slightly higher at the London equities close, with the S&P 500 index touching a fresh record intraday high, as equity markets evinced little worry over data showing higher US inflation.
The DJIA was up 0.2%, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.2%.
The pound was quoted at USD1.4147 at the London equities close, up from USD1.4120 at the close Wednesday, as the G7 summit gets underway in Cornwall, south England.
It is the first time the summit will take place on British soil since 2013, when then-prime minister David Cameron welcomed the world's leaders to Northern Ireland.
US President Biden will tell UK Prime Minister Boris Johnson not to let the row over Northern Ireland's Brexit arrangements put the Good Friday Agreement at risk when the pair meet on Thursday.
In Biden's first overseas visit, aides said he will stress the need to "stand behind" the Northern Ireland Protocol, the element of the Brexit deal which has triggered a UK-EU dispute. The issue has threatened to overshadow Johnson's first meeting with the US president and his hosting of the G7 summit, which begins on Friday in Cornwall.
Aside from Brexit, Johnson and Biden will work on efforts to resume transatlantic travel and agree a new Atlantic Charter paving the way for co-operation on challenges including climate change and security.
Commenting on the current state of play, analysts at OFX explained: "Two items are driving this at the moment. Firstly, and as mentioned throughout the week, Covid cases in the UK are rising with yesterday seeing the highest number of infections since late February. This is causing more and more concern that the June 21 'Freedom Day' will be pushed back. Matt Hancock is speaking in front of MPs this morning so all eyes will be focused on him.
"The second factor driving sterling weakness at the moment is Brexit. The escalation in tensions over trade rules in Northern Ireland has driven the pound lower and even President Biden has added pressure to end the stand-off."
The euro stood at USD1.2168 at the European equities close, down from USD1.2186 late Wednesday, following dovish tones from the European Central Bank.
The ECB confirmed its "very accommodative" monetary policy will continue, as it maintained the pace of its pandemic bond-buying programme.
The Frankfurt-based central bank kept the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and negative 0.50%, respectively.
The ECB also left the size of its pandemic emergency purchase programme, or PEPP, unchanged at EUR1.85 trillion until at least the end of March 2022 and, "until it judges that the coronavirus crisis phase is over".
In addition, the central bank significantly raised its 2021 and 2022 economic growth outlook on Thursday, as virus curbs ease and the eurozone recovery gathers pace.
The eurozone economy is now expected to grow by 4.6% this year and 4.7% in 2022, up from earlier projections of 4.0 and 4.1% respectively. The forecast for 2023 remained unchanged at 2.1% growth.
ECB President Christine Lagarde warned that it was "premature" to start tightening monetary policy, saying continued support was needed to reduce economic uncertainty despite a brighter outlook.
Tightening financing conditions "would be premature and would pose a risk to the ongoing economic recovery and the outlook for inflation," Lagarde said, adding that keeping the easy money taps open throughout the pandemic crisis "remains essential to reduce uncertainty and bolster confidence".
Against the yen, the dollar was trading at JPY109.56, down slightly from JPY109.60 late Wednesday.
Brent oil was quoted at USD72.45 a barrel at the equities close, up from USD72.36 at the close Wednesday. Gold was priced at USD1,891.85 an ounce at the London equities close, little changed against USD1,890.50 late Wednesday.
The economic events calendar on Friday has UK industrial production, trade and economic growth figures at 0700 BST and Spain inflation readings at 0800 BST.
The UK corporate calendar on Friday has annual results from Naked Wines and Mind Gym.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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