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(Alliance News) - European equities rallied on Wednesday, taking a US consumer price index in their stride, as a 7% yearly inflation figure for December was met with "relief".
The FTSE 100 index closed up 60.35 points, or 0.8%, at 7,551.72. The mid-cap FTSE 250 index rose 18.98 points, or 0.1%, at 23,047.16. The AIM All-Share index rose 0.97 of a point, 0.1%, to 1,174.61.
The Cboe UK 100 index ended up 0.7% at 748.50. The Cboe 250 closed up 0.1% at 20,592.38 and the Cboe Small Companies rose 0.9% at 15,715.31.
The CAC 40 stock index in Paris closed up 0.8%, while the DAX 40 in Frankfurt ended 0.4% higher.
"There was an interesting response to the slightly stronger-than-expected US inflation data," ThinkMarkets analyst Fawad Razaqzada commented.
"It looks like the market had prepared for even hotter inflation, which obviously didn't materialise. So the reaction can best be described as relief."
The annual rate of consumer price inflation in the US ended 2021 at its highest level in roughly 40 years, according to figures from the Department of Labor.
The US consumer price index print for December showed the highest rate of inflation since June of 1982 at 7.0%, following a 6.8% annual acceleration in November.
Oanda analyst Craig Erlam commented: "On a monthly basis, the CPI readings were also marginally ahead of expectations, although not to the degree that has caused any alarm. Rather, it seems the inflation data has been welcomed with investors seemingly fearing much worse.
"It would appear relentless optimism is perhaps returning to the markets and dip buyers are diving back in."
In New York, an early rally ebbed by the time of the closing bell in London. The Dow Jones Industrial Average was only marginally higher, while the S&P 500 and Nasdaq Composite were up 0.2% and 0.1%, respectively.
The dollar weakened following the US CPI data.
The pound was quoted at USD1.3693 late Wednesday, up from USD1.3617 at the London equities close Tuesday. The euro was priced at USD1.1425, higher against USD1.1327. Against the Japanese yen, the dollar was trading at JPY114.73, down from JPY115.37.
Markets came into Wednesday's session in decent footing, after comments from US Federal Reserve Chair Jerome Powell lifted equities on Tuesday.
Erlam added: "Jerome Powell put in a decent performance on Tuesday, but sentiment is clearly very fragile and it may not take much to tip investors over the edge again. Three rate hikes are now heavily priced into the markets this year, with balance sheet reduction perhaps starting in the third quarter."
London markets got a boost from a batch of promising Christmas updates from the retail sector on Wednesday
CMC Markets analyst Michael Hewson commented: "It's important not to underestimate the importance of this key period for retailers and despite the doom and gloom in respect of supply chain disruptions, rising staffing costs, and energy prices, today's reports from the retail sector have been solid."
Grocer Sainsbury's added 3.3%. The supermarket chain said its investment in value, new products and service drove volume market share gains, trading ahead of the overall UK market through its financial third quarter and the key Christmas period.
For the 16 weeks to January 8, total retail sales - excluding fuel - were down 5.3% following 6.8% growth in the third quarter of financial 2021.
Looking ahead, Sainsbury said it is raising annual profit guidance, reflecting strong grocery sales, cost savings delivery, and an improved outlook for Sainsbury's Bank.
Elsewhere in the retail sector, Dunelm rose 5.2% after the home furnishings retailer reported GBP407 million in total sales in the 13 weeks that ended December 25, its financial second quarter.
This was up 13% on a year ago and a 26% increase on two years ago.
Dunelm said it expects first half pretax profit of GBP140 million, up from GBP112 million a year ago and GBP84 million two years prior.
Adding to the string of strong retail updates was DFS Furniture, rising 8.3%. It credited booming orders for accelerating trading momentum.
The furniture retailer reiterated previous profit guidance.
Order intake over the first half that ended in December was materially ahead of the 2019 pre-pandemic comparative period but was lower than the exceptional trading seen last year.
Gross sales climbed 10% on the 2019 comparative, with delivery throughput accelerating across the half, DFS noted.
Elsewhere in London, miners ended sharply higher.
IG analyst Chris Beauchamp commented: "It is good to be a bit of a commodity index sometimes. The FTSE 100's big-name mining and oil contingent have been bolstered by the weaker dollar and the accompanying rise in commodity prices. Plus if inflation's rise does moderate a bit then central banks generally might be less keen to put the brakes on, helping to maintain the rebound in global GDP."
Antofagasta topped the FTSE 100, rising 7.3%.
On the UK political front, Prime Minister Boris Johnson on Wednesday apologised for attending a "bring your own booze" gathering in the garden of No 10 during England's first lockdown as he battled to save his job.
Johnson acknowledged the public "rage" over the incident but insisted he thought it could have been technically within the rules.
Johnson told members of Parliament on Wednesday that he attended the May 20, 2020 gathering for around 25 minutes to "thank groups of staff".
"Sterling is shrugging off the political uncertainty," analysts at BBH Global Currency Strategy commented.
Brent oil was quoted at USD84.68 a barrel late Wednesday, up from USD83.44 late Tuesday. Gold stood at USD1,822.60 an ounce, up from USD1,816.01.
Thursday's economic calendar has Japan machine tool orders at 0600 GMT, before a US producer price index report at 1330 GMT.
In the local corporate calendar, the retail sector will be in focus again as grocer Teso and fast fashion firm ASOS release trading statements. Retailer Marks & Spencer Group and bikes and cycling equipment seller Halfords release third quarter numbers.
Housebuilder Persimmon and pub, bar and restaurant operator Mitchells & Butlers also report trading statements.
By Eric Cunha; ericcunha@alliancenews.com
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