(Alliance News) - UK consumer prices nudged up in June but cheap energy kept the annual inflation rate subdued, according to the latest figures from the Office for National Statistics on Wednesday.
The annual inflation rate ticked up to 0.6% in June from 0.5% in May, beating consensus, according to FXStreet, of 0.4%.
Food prices rose 1.0%, while alcohol notched a 1.4% increase. Clothing prices fell 2.2%, however.
Fuel prices remained a drag, with gas prices down 12% on a year before, and liquid fuels down 35%. Prices of fuels & lubricants slipped 16%.
Month-on-month, consumer prices rose 0.1% after May's flat reading and April's 0.2% fall. This was helped by a 17% monthly rise in liquid fuel prices.
"The inflation rate has increased for the first time this year, but remains low by historical standards," said Jonathan Athow, deputy national statistician for Economic Statistics at the ONS.
"Due to the impact of the coronavirus, clothing prices have not followed the usual seasonal pattern this year, with the normal falls due to the start of the summer sales failing to materialise," he noted.
Separately, the ONS showed an improvement in producer price trends in June.
Annual output factory price inflation was minus 0.8% in June, though an improvement from negative 1.2% in May. Input prices, meanwhile, fell 6.4% in the year to June, again an improvement from a 9.4% fall in May.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.7% at 6.225.66
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Hang Seng: down 0.4% at 25,388.92
Nikkei 225: closed up 1.6% at 22,945.50
DJIA: closed up 556.79 points, 2.1%, at 26,642.59
S&P 500: closed up 1.3% at 3,197.52
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GBP: up at USD1.2600 (USD1.2547)
EUR: firm at USD1.1425 (USD1.1403)
Gold: soft at USD1,807.07 per ounce (USD1,808.60)
Oil (Brent): unchanged at USD43.10 a barrel
(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
OPEC Joint Ministerial Monitoring Committee meeting continues.
1100 BST Ireland goods exports and imports
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US Empire State manufacturing survey
0830 EDT US import & export price indices
0915 EDT US industrial production & capacity utilization
1030 EDT US EIA weekly petroleum status report
1400 EDT US Beige Book
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The UK Treasury has commissioned a review of capital gains tax as Chancellor Rishi Sunak looks to find a way of paying back the billions of pounds borrowed to support the economy through the Covid-19 crisis, PA reports. The chancellor has asked the Office for Tax Simplification to look at how capital gains tax – a tax applied on profits on homes and other assets – is currently applied. The review comes after the Office for Budget Responsibility said government measures to address the impact of the virus would result in an "unprecedented peacetime rise in borrowing" this year, escalating to between 13% and 21% of GDP and reaching up to GBP322 billion. The fiscal watchdog also warned that the UK economy might not recover from the pandemic until 2024. But Treasury sources suggested there was no truth the review would be used to raise taxes and pin the borrowing bill on the wealthy. A Treasury spokeswoman said: "It is standard practice to keep taxes under review."
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Japan's economy will contract 4.7% in the year to March 2021, the central bank said, projecting a recovery the following year but warning deep uncertainty remains. The fresh outlook, with policymakers giving a range of shrinkage from 5.7 to 4.5%, is a downgrade from an April projection of a 5.0-3.0% contraction. The Bank of Japan stayed hopeful about a future recovery but said the outlook was shrouded by possible future waves of the virus, which made calculations difficult. The central bank said it would maintain its massive monetary easing programme, leaving short-term rates at minus 0.1% while keeping long-term rates around zero percent.
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BROKER RATING CHANGES
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GOLDMAN SACHS INITIATES ANGLO AMERICAN WITH 'NEUTRAL' - TARGET 1900 PENCE
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GOLDMAN INITIATES GLENCORE WITH 'BUY' - TARGET 220 PENCE
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JPMORGAN CUTS FERREXPO TO 'UNDERWEIGHT' ('NEUTRAL') - TARGET 150 (130) PENCE
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EXANE BNP INITIATES 3I GROUP WITH 'OUTPERFORM' - TARGET 970 PENCE
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UBS RAISES JUPITER FUND MANAGEMENT TO 'BUY' ('NEUTRAL') - TARGET 285 (260) PENCE
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COMPANIES - FTSE 100
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Burberry said sales in the first quarter took a severe hit as demand for luxury goods was dealt a blow due to the coronavirus pandemic. For the period ending June 27, retail revenue was down 48% to GBP257 million from GBP498 million in the first quarter of 2019. Comparable sales declined 45% in the first quarter, but eased to a 20% decline in the month of June as lockdown restrictions became less stringent. The luxury retailer expects the second quarter to end of September to continue to suffer from the pandemic. In retail, it said, tourist flows are likely to remain negligible, and store operations are continuing to face significant pressures, with some remaining closed and operating with reduced trading hours. Burberry expects retail sales performance to decline by 15% to 20% in the second quarter. In wholesale, it is collaborating with partners to protect the brand and as a result, anticipates first-half sales to fall around 40% to 50%. The stock was down 5.0% early Wednesday.
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Severn Trent said the first quarter of the financial year has been in line with expectations and continues to expect to deliver full-year trading performance consistent with prior guidance. The UK water company's AMP7 plans remain unchanged as it benefits from the clarity of a finalised regulatory settlement. Severn Trent continues to guide a GBP50 to GBP85 million hit to 2021 revenue and said the Ofwat regulatory model allows this to be recovered in 2022-23. "We have been encouraged by cash collections broadly in line with the same period a year ago, but continue to anticipate Covid-19 bad debt increases in line with guidance previously given as government support schemes come to an end," the company warned however.
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GlaxoSmithKline late on Tuesday said its Belantamab Mafodotin cancer medication received a vote of confidence from an advisory board to the US Food & Drug Administration. GSK added however, that the nod from FDA's Oncologic Drugs Advisory Committee does not guarantee regulatory approval. The company said 12 of 14 committee members voted in favour of the "demonstrated benefit" of Belantamab to treat relapsed or refractory multiple myeloma - a cancer that forms in the white blood cells - outweighing its risks. The remaining two members of the committee were unable to make the final vote. The drug is currently not approved for use anywhere in the world, the company noted.
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COMPANIES - FTSE 250
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Dixons Carphone narrowed its pretax loss to GBP140 million in financial year that ended May 2 from GBP259 million the year before, though adjusted pretax profit fell to GBP166 million from GBP339 million due Covid-19 store closures and weakness in the Mobile business.
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Dunelm said total sales fell 29% in the fourth quarter of its financial year ended June 27, despite online sales more than doubling. April sales were down 78% on a year before and May sales down 48%, but June sales rose 20%. The homewares retailer expects full-year pretax profit to be between GBP105 million and GBP110 million, down from GBP125.9 million the year before.
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COMPANIES - MAIN MARKET AND AIM
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ASOS has dropped a slew of suppliers after unearthing health, safety and human rights threats, the Daily Telegraph reported late Tuesday. According to the newspaper, a leaked 2018 report states that ASOS inspectors had found a series of breaches at roughly a quarter of its suppliers, include some sites in the UK. The Telegraph added that since then, ASOS has ditched several factories. One supplier in the UK that ASOS has ditched is based in Leicester, a city which has been at the heart of allegations involving Boohoo Group and Quiz, according to the newspaper. Separately early Wednesday, ASOS said total retail sales in the four months to June were GBP983.3 million, up 10% on a year before. However gross margin was down by 70 basis points. It expects full-year pretax profit to be at the top end of market expectations. The stock was up 4.3% early Wednesday.
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Galliford Try said its construction sites across the UK are now operational with underlying operations performing well. The company said its order book was up 10% to GBP3.2 billion from GBP2.9 billion last year. The construction firm said it was well-capitalised, with cash at June 30, of GBP195 million against net debt of GBP57 million last year and average month-end cash during the six months of GBP140 million. Galliford noted that, as expected, the combination of site closures and reduced productivity significantly reduced revenue in the final quarter of the financial year. Further, it said that the cost of implementing new operating procedures and site programmes has led to a material reduction in gross margin in the financial year to June 2020, with divisional operating margins expected to show a loss of 5%. However, productivity levels on its sites have gradually increased since the beginning of the lockdown, and Galliford said it starts the new financial year with productivity close to normal and operating margins expecting to improve in line with its target.
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COMPANIES - GLOBAL
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ASML Holdings reported second-quarter revenue and earnings growth, and forecast a further sequential increase in sales for the quarter ahead. Net sales rose 30% to EUR3.33 billion in the second quarter of 2020 from EUR2.57 billion a year ago, while net income jumped 58% to EUR751.0 million from EUR476.0 million. The results also marked a sequential improvement, with ASML having posted net sales of EUR2.44 billion for the first quarter of 2020 and net income of just EUR391 million. The Netherlands-based photolithography systems supplier expects revenue to improve further in the third quarter, to between EUR3.6 billion and EUR3.8 billion. The gross margin is seen around 47% to 48% in the third quarter, only just below the 48.2% posted for the second quarter.
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Wednesday's Shareholder Meetings
Europa Metals (re share consolidation)
Tullow Oil (re stake sale in Albert project)
Thalassa Holdings
Burberry Group
Biotech Growth Trust
Air Partner
Severn Trent
Danakali
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
