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(Alliance News) -Â Stock prices in London are set to open lower on Wednesday amid a raft of inflation readings from the UK, Germany, Ireland and Canada, as investors show jitters over the outlook for central bank policy tightening.
Both the UK and Germany saw consumer price inflation in December top the 5% mark again, with the UK reading the highest in almost 30 years.
IG says futures indicate the FTSE 100 index of large-caps to open down 31.35 points, or 0.4%, at 7,532.20 on Wednesday. The FTSE 100 closed down 47.68 points, 0.6%, at 7,563.55 on Tuesday.
"The return of US markets from their long weekend saw equity markets fall back sharply yesterday, as rising bond yields across the globe reflected growing market concern that central banks might have to hike rates and embark on quantitative tightening much more aggressively than had originally been priced," said Michael Hewson, chief market analyst at CMC Markets.
In the US on Tuesday, Wall Street ended deep in the red on return from a long weekend, with the Dow Jones Industrial Average down 1.5%, the S&P 500 down 1.8%, and the Nasdaq Composite down 2.6%.
Those concerns will remain at the fore on Wednesday amid a deluge of inflation readings across the globe.
Already out, UK inflation surged to an annual rate of 5.4% in December from 5.1% in November. This topped market forecasts of 5.2%.
"This is the highest CPI 12-month inflation rate in the National Statistic data series, which began in January 1997, and it was last higher in the historical modelled data series in March 1992, when it stood at 7.1%," the Office for National Statistics said.
Pushing up the index were prices for second hand cars, jumping 29% after a rise of 27% in November, while food price inflation accelerated to 4.5% from November's 2.4% growth. Encouragingly, while prices of fuels & lubricants grew a heady 27% in December, this was slowed from 29% in November, and electricity price growth was steady at 19%.
"We're bringing forward our forecast for the next increase in [the UK] Bank Rate to February from March, following December's consumer prices figures," said Pantheon Macroeconomics.
Investors are already braced for four rate hikes from the Bank of England this year.
Sterling was quoted at USD1.3602 following the data, higher than USD1.3583 at the London equities close on Tuesday.
In Germany, data confirmed consumer prices rose 5.3% year-on-year in December, taking 2021's average annual inflation rate to 3.1%.
"A higher year-on-year rate of price increase than in 2021 was last measured almost 30 years ago," said Destatis, at 4.5% in 1993.
The euro firmed to USD1.1339 early Wednesday from USD1.1335 late Tuesday.
In early UK company news, Burberry reported third-quarter sales growth and said it sees a softer-than-anticipated currency headwind for the full year.
Retail revenue amounted to GBP723 million in the 13 weeks to December 25, up 5% from GBP688 million a year prior. Full-price comparable store sales rose 15% year-on-year, with all comparable store sales up 7%.
On two years prior, being before the impact of the pandemic, full-price comparable store sales were up 26% but all comparable store sales down 3%.
Looking out, Burberry expects full-year adjusted operating profit to grow in the region of 35% at constant exchange rates. In addition, the currency headwind is now expected to be GBP79 million on revenue, down from around GBP100 million, and GBP27 million on adjusted operating profit, down from GBP40 million.
Miner BHP reported a 12% annual fall in copper output but a 1% rise in iron ore production. BHP said the outlook for its 2022 copper production is trending toward the low end of its guidance range.
Pearson said it made "great progress" in the four quarter, leading to a better-than-expected full-year outturn.
Full-year sales were up 8% and the education publisher expects adjusted operating profit of GBP385 million, up 33% on the year before and ahead of consensus at GBP375 million.
"Led by a strong management team, we are repositioning the business, driving digital innovation and an increased focus on the consumer through the launch of Pearson+. We are well placed to build on this momentum in the year ahead and look to the future with confidence," said Chief Executive Andy Bird.
Pub operator JD Wetherspoon said it will post a first-half loss but is hoping for a "much stronger" performance in the second half of its financial year as virus restrictions ease.
In the 25 weeks to January 16, like-for-like sales were down 12% and total sales fell 13% against the same period in the 2020 financial year. Second quarter sales were hit by the UK government's Plan B coronavirus restrictions in England, the firm said.
"As mentioned in our update on 13 December 2021, the uncertainty created by the introduction of plan B Covid-19 measures makes predictions for sales and profits hazardous," said Wetherspoon Chair Tim Martin.
UK Prime Minister Boris Johnson is expected to announce to Parliament on Wednesday that the Plan B measures will be lifted next week.
In Asia on Wednesday, the Japanese Nikkei 225 index slumped 2.8%. In China, the Shanghai Composite ended down 0.3%, while the Hang Seng index in Hong Kong was down 0.2%. The S&P/ASX 200 tumbled 1.0%.
Against the yen, the dollar fell to JPY114.36 versus JPY114.61.
Gold was quoted at USD1,813.30 an ounce early Wednesday, higher than USD1,812.88 on Tuesday. Brent oil was trading at USD87.93 a barrel, higher than USD87.22 late Tuesday.
By Lucy Heming;Â lucyheming@alliancenews.com
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