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(Alliance News) - UK consumer and producer prices jumped in June, figures on Wednesday showed, remaining above the Bank of England's target of 2.0% for the second month in a row.
The Office for National Statistics said the UK consumer price index jumped 2.5% on an annual basis in June, accelerating from 2.1% growth in May. The largest upward contribution to the 12-month inflation rate came from transport.
Month-on-month, UK consumer prices rose 0.5% in June, slower than May's 0.6% rate of monthly growth.
Prices for food, second-hand cars, clothing and footwear, eating and drinking out, and motor fuel rose between May and June after falling between the same two months a year ago.
A separate release from the ONS on Wednesday showed UK producer price inflation also strengthened in May.
Output prices grew 4.3% in the year to June, slowing from growth of 4.4% in May, while input prices jumped 9.1% on a 12-month basis, again easing from May when prices grew 10%.
Transport equipment, and metals and non-metallic minerals provided the largest upward contributions to the annual rates of output and input inflation, respectively.
"Despite breaching the Bank's target, and despite the US posting the biggest inflation print in 13 years yesterday, it's still likely that this bout of inflation won't be sustained over the long-term," commented Richard Carter, head of fixed interest research at Quilter Cheviot.
Figures on Tuesday showed US consumer price inflation accelerating to 5.4% in June from 5.0% in May.
"The price increases in the UK are being driven by the sectors that struggled since the start of the pandemic," Carter added. "Most of these sectors registered negative price growth for many months in 2020 so it's only natural that prices rise as demand returns. With second-hand cars in particular, this is being driven by the global semi-conductor shortage and therefore the shortage of new cars."
However, if inflation expectations become "ingrained among consumers and producers, this could spell trouble", Carter said. "It is in this situation that the Bank of England will be compelled to act swiftly to remove the inflationary pressures."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.5% at 7,092.21
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Hang Seng: down 0.7% at 27,759.37
Nikkei 225: closed down 0.4% at 28,608.49
DJIA: closed down 107.39 points, or 0.3%, at 34,888.79.
S&P 500: closed down 15.42 points, or 0.4%, at 4,369.21
Nasdaq Composite: closed down 55.59 points, or 0.4%, at 14,677.65
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EUR: down at USD1.1794 (USD1.1815)
GBP: up at USD1.3846 (USD1.3838)
USD: up at JPY110.44 (JPY110.33)
Gold: up at USD1,812.23 per ounce (USD1,811.70)
Oil (Brent): up at USD76.39 a barrel (USD75.50)
(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
France Bastille Day holiday - financial markets closed
1100 CEST EU industrial production
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US producer price index
1030 EDT US EIA weekly petroleum status report
1200 EDT US Fed Chair Powell speaks to House Financial Services Committee
1400 EDT US Fed Beige Book
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Popular Spanish holiday islands are in danger of being moved onto the UK amber list only a fortnight after being approved for quarantine-free travel, according to reports. The Balearic islands, including tourist hotspots Ibiza, Mallorca and Menorca, could be set to be moved off the green watchlist – destinations the UK government considers safe for travel but which could potentially be downgraded to the amber list – on Wednesday due to rising cases, the reports have suggested. Those travelling to amber listed countries, such as mainland Spain, have to self-isolate for 10 days on their return to England. However, as of July 19 the requirement to quarantine will be scrapped for the fully vaccinated and those aged under 18. The Sun, which first reported the alleged travel change, quoted a source saying: "It's all still up for discussion, but the figures aren't great which is why it was on the watch list in the first place."
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BROKER RATING CHANGES
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BERENBERG RAISES CARNIVAL PLC TO 'HOLD' ('SELL') - TARGET 1,400 PENCE
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JEFFERIES INITIATES XP POWER WITH 'HOLD' - TARGET 5,200 PENCE
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BERENBERG INITIATES ITM POWER WITH 'HOLD' - TARGET 400 PENCE
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COMPANIES - FTSE 100
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Housebuilder Barratt Developments reported strong demand across the country in the financial year that ended June 30. Net private reservations per active outlet per week were 0.78, up from 0.60 in financial 2020 and 0.70 in financial 2019. Completion volumes also ticked up, with 17,243 total homes completed in the recent financial year versus 12,604 homes in financial 2020 and 17,856 homes in financial 2019. Barratt said it expects pretax profit, after adjusted items of GBP107 million, to be at the top end of the range of market forecasts. Looking ahead, the company said it is well positioned for its new financial year, with total forward sales - including joint ventures - as at June 30 of 14,334 homes, up from 14,326 homes the year before and up from 11,419 homes year-on-two-years.
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Drugmaker AstraZeneca said the UK Competition & Markets Authority has cleared its proposed acquisition of Alexion Pharmaceuticals. As a result, the acquisition is expected to close on July 21. The move follows clearance received from the European Commission on Tuesday last week, and approvals in the US, Japan and other countries. AstraZeneca is buying Boston, Massachusetts-based biotech firm Alexion in a cash-and-stock deal that was worth around USD39 billion when the acquisition was first announced back in December. The deal will "enhance the company's scientific presence in immunology", Astra said. After the acquisition is complete, a new group focusing on rare diseases will be created named Alexion, AstraZeneca Rare Disease, and will be headquartered in Boston.
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COMPANIES - FTSE 250
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Homewares retailer Dunelm Group said total sales in the 13-week period ended June 26 more than doubled compared to the same period last year, when stores were closed during the first national lockdown. On a two year basis, total sales in the quarter were up by 44%. Digital sales growth, meanwhile, also remained strong throughout the quarter, up 38% on the same period last year, Dunelm said. Looking ahead, Chief Executive Nick Wilkinson said: "With many exciting developments in the pipeline to make us the first choice for home, and grow our customer base and frequency, there is a lot to look forward to." In addition, Dunelm named Vijay Talwar as a non-executive director from October. Talwar is chief executive officer for Europe, Middle East & Africa at New York-based athletic retailer Foot Locker.
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SSP, which operates food outlets such as Upper Crust in travel locations, said CEO Simon Smith will leave at the end of 2021 to take up a new role at a "private equity backed business". SSP said it now will search for a replacement. It added that current trading is in line with expectations, with a recovery in demand, led by domestic and leisure travel, particularly in North America. Third quarter sales were at 27% of 2019 levels, while the most recent week was at 42%. SSP said its outlook for the rest of its financial year is unchanged.
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Coats Group - an industrial thread manufacturer - said strong operational performance and demand recovery have continued in the first half of 2021, despite the impact of recent lockdowns in India in May and June, which have now subsided. Sales for the half-year were USD732 million, up from USD536 million a year ago and up from USD705 million in the first half of 2019. Coats said it now expects adjusted operating profit for the first half to be around USD95 million, almost tripled from USD34 million a year prior but lower than USD102 million in the first half of 2019.
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COMPANIES - MAIN MARKET AND AIM
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Clothing retailer boohoo has partnered with Alshaya Group, building on the presence of Debenhams in the Middle East region. Alshaya will have exclusive rights to operate the Debenhams stores and a local e-commerce platform in Kuwait, Saudi Arabia, United Arab Emirates, Bahrain, Egypt, Oman and Qatar.
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Wednesday's Shareholder Meetings
BP Marsh & Partners PLC - AGM
Braveheart Investment Group PLC - AGM
Burberry Group PLC - AGM
DP Eurasia NV - AGM
Draper Esprit PLC - AGM
India Capital Growth Fund Ltd - AGM
LXI REIT PLC - AGM
Telit Communications PLC - GM re takeover
Trackwise Designs PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
