easyJet Share News (EZJ)

LONDON (Alliance News) - UK stocks rallied Tuesday, as UK inflation hit a four-year low and companies including B&Q parent Kingfisher and low-cost airline easyJet put out strong reports.

The FTSE 100 closed up 1.3% at 6,604.89, more than reversing Monday's losses, while the FTSE 250 closed up 0.8% at 16,153.13, and the AIM All-Share closed up 0.7% at 851.37.

The Office for National Statistics said UK consumer price inflation slowed to 1.7% year-on-year in February, down from 1.9% in January, marking the fifth consecutive month that inflation has slowed. The drop was in line with economists' forecasts.

Factory gate output inflation came in at 0.5%, down from 0.9% in January and the lowest annual rate since October 2009, while input prices continued their decline for the fourth consecutive month in February, dropping 5.7% annually, having fallen 2.9% in January.

"Hot on the heels of some positive economic rhetoric during last week's Budget, consumers have received a boost to the cost of living with inflation hitting another four-year low," said Dennis de Jong, managing director at UFXMarkets.

The British Bankers Association Tuesday said that mortgage approvals for house purchases in the UK unexpectedly declined in February. The number of home loan approvals decreased to a seasonally adjusted 47,550, down from the 49,341 recorded in January, which was revised lower from 49,972.

The pound held up well against other major currencies Tuesday, gaining slightly against the dollar to trade at USD1.6525 after the equity markets closed.

The euro, however, fell against the dollar, hit first by disappointing economic data and then by comments from European Central Bank President Mario Draghi.

German business confidence slipped by more than expected in March. The monthly IFO survey showed that the business sentiment index in Europe's largest economy dropped to 110.7, down from the 111.3 posted in February, and missing economists' expectations of a more modest decline to 111.0.

Later, Mario Draghi reiterated his recent comments that the ECB stands ready to take further policy easing if necessary. His comments sent the euro to a near three-week low against the dollar of USD1.3747, although the single currency then recovered to above USD1.38.

Major European equity markets also closed higher Tuesday, with the CAC 40 gaining 1.6%, and the DAX 30 gaining 1.6%.

Within UK equities, the inflation data weighed on supermarket stocks. Food price inflation fell to 1.8% in February, the lowest rate since July 2012, at a time when Tesco and Wm Morrison have both announced big investments in price cuts.

"We suggest falling inflation, and potentially deflation, is set to be a feature of the UK grocery market for some time to come," said Shore Capital analyst Darren Shirley.

Kingfisher was biggest gainer on the FTSE 100, closing up 6.0% after the home improvement retailer reported an increase in pretax profit to GBP759 million in 2013, from GBP691 million the previous year, as well as announcing the start of a multi-year capital return programme to shareholders. The retailer also said that it is looking for a strategic partner for B&Q China and that it plans to take its successful UK Screwfix business international.

Easyjet closed up 3.7% after it said it expects its first-half pretax loss to be between GBP55 million and GBP65 million, narrower than the GBP70 million to GBP90 million it had predicted in January. The low-cost airline revised its predictions after the mild winter weather reduced disruptions and meant it spent less than usual on costly de-icing of its planes. It also revised up its seat revenue growth prediction, partly citing the popularity of its seat allocation programme.

The beverages sector was amongst the best performing of the FTSE 350 sector indices Tuesday. AG Barr closed up 2.2% after reporting a 6.9% increase in annual revenues to GBP254.1 million in 2013. The soft-drink maker said it's margins improved throughout the year, reflecting an improvement in the cost of goods. SAB Miller gained 5.0%, while Britvic also gained 2.7%.

888 Holdings gained 6.1% after reporting a 30% increase in pretax profit to USD53.2 million in 2013 from USD40.8 million in 2012. The online gaming and betting company successfully launched in several regulated US states, including Nevada, Delaware, and newly regulated New Jersey, through a number of strategic partnerships.

Lloyds Banking Group will be in focus Wednesday morning and the UK government announced just after the close Tuesday that it sell 5.35 billion more Lloyds shares, reducing its holding to about 25%, from 32.7%. The second phase of its privatisation of the bailed out bank will begin immediately, although will only be open to institutional investors. Lloyds closed up 0.8% at 79.11p Tuesday ahead of the announcement.

In Wednesday's corporate calendar, TUI Travel is due to release a trading statement, Bellway will release interim results, while preliminary full-year results are due from Marshalls, IQE, Lamprell, Moss Bros, EnQuest, and Vislink.

The main economic focus Wednesday is the afternoon release of US durable goods orders for February at 1230 GMT. Economists expect orders to have risen by 1.0% over the month, reversing the 1.0% decline recorded in January. The US Markit Services PMI for March is also due to be released, with economists expecting a pick up in activity to 54.2, from 53.3 in February.

In the absence of any UK economic data, the German Gfk consumer confidence survey, released before the equity markets open at 0700 GMT, will provide the early focus. Despite Tuesday's disappointing German IFO Business survey, consumer confidence is expected to have remained more resilient in recent weeks, with the Gfk survey forecast to remain stable at 8.5 for April.

Italian retail sales are due at 0900 GMT, with sales expected to have risen by 0.4% month-on-month in January, which would reverse the 0.3% decline recorded in December.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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