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(Alliance News) - Stocks in London are set to open lower on Wednesday, following news that UK inflation cooled slightly more than expected in December and the Bank of Japan kept its loose monetary policy unchanged.
The consumer price index rose by 10.5% annually last month, compared to a 10.7% rise in November. Market consensus had expected 10.6% inflation in December, according to FXStreet.
"The potential downtrend in UK inflation could fan expectations that the Bank of England may hint an end to its tightening cycle, but we wouldn’t risk getting too excited, too soon," said Tom Hopkins, a portfolio manager at BRI Wealth Management.
"The annualized core inflation, which strips out energy and food, held firm at 6.3%, the same reading booked in November, showing inflation is sticking. We do believe there are further rate hikes to come from the Bank of England if they want to show they are serious about bringing this CPI figure down."
The Bank of Japan defied expectations and left its own monetary policy unchanged on Wednesday.
Officials shocked the market last month by adjusting one of its policy tools, widening the band in which it allows rates for 10-year government bonds to move.
On Wednesday policymakers left the yield curve control range intact and said the BoJ would continue with "large-scale" purchases of government bonds to support the parameters.
The move saw the yen weaken significantly, and Japanese stocks get a sharp boost.
In UK company news, Burberry saw sales inch up despite significant disruption in China, and food delivery service Just Eat Takeaway swung to positive adjusted earnings.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 11.13 points, or 0.1%, at 7,839.90
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Hang Seng: up 0.2% at 21,626.05
Nikkei 225: closed up 2.5% at 26,791.12
S&P/ASX 200: closed up 0.1% at 7,393.40
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DJIA: closed down 391.76 points, 1.1%, at 33,910.85
S&P 500: closed down 0.2% at 3,990.97
Nasdaq Composite: closed up 0.1% at 11,095.11
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EUR: higher at USD1.0810 (USD1.0804)
GBP: higher at USD1.2321 (USD1.2278)
USD: higher at JPY130.40 (JPY128.18)
Gold: lower at USD1,907.19 per ounce (USD1,912.88)
(Brent): higher at USD86.50 a barrel (USD85.56)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
09:30 GMT UK house price index
07:00 EST US MBA weekly mortgage applications survey
08:30 EST US producer price index
08:55 EST US Johnson Redbook retail sales index
09:15 EST US industrial production
09:20 EST US Fed Atlanta President Raphael Bostic speaks
10:00 EST US NAHB housing market index
14:00 EST US Federal Reserve Beige Book
15:00 EST US Fed Philadelphia President Patrick Harker speaks
16:30 EST US API weekly statistical bulletin
16:00 CST US Fed Dallas President Lorie Logan speaks
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Inflation in the UK cooled slightly in December, the latest figures from the Office for National Statistics showed. The consumer price index rose annually by 10.5% last month, compared to a 10.7% rise in November. Consensus had expected 10.6% inflation in December, according to FXStreet. The print is down from a four-decade high of 11.1% in October. On a monthly basis, CPI rose by 0.4% in December, the same pace as in November and in line with market expectations.
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BROKER RATING CHANGES
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Bofa cuts Segro to 'neutral' ('buy') - price target 840 (850) pence
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Bofa raises Land Securities to 'buy' ('neutral') - price target 740 (640) pence
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Bofa raises British Land to 'buy' ('underperform') - price target 470 (400) pence
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COMPANIES - FTSE 100
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Smiths updated guidance as it reported continued strong organic revenue growth in the second quarter of its financial year, ending January 31, noting growth across all its businesses. The engineering firm now expects to deliver low double-digit percentage organic revenue growth for the first half and organic revenue growth of "at least" 7% in the full-year, as well as "moderate" margin improvement. Smiths said uncertainty remains high, however, and supply chain snarls persist.
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Luxury fashion house Burberry said comparable store sales grew by just 1% in its financial third quarter, following significant lockdown disruption in China and the reopening of the nation. Growth outside of China was 11%, meanwhile. Europe in particular continued to perform well, Burberry said, driven by strong trading over the festive period, with leather goods delivering another quarter of double-digit growth. Chief Executive Jonathan Akeroyd said the firm remains confident in its ability to reach its medium-term targets, despite the current macro-economic environment.
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COMPANIES - FTSE 250
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Travel and high street retailer WH Smith said it delivered a strong performance in the 20 weeks to January 14, with revenue up 41% against the previous year and up 20% against pre-pandemic levels. WH Smith noted particular strength in its Travel business which saw revenue up 77% against financial 2022 and up 48% against financial 2019, meaning pre-pandemic. The retailer noted this performance was achieved despite passenger numbers remaining "well below" 2019 levels. Looking forward, WH Smith said that, though economic uncertainty remains, passenger numbers continue to improve, and therefore it remains confident of making significant progress in 2023.
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OTHER COMPANIES
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Just Eat Takeaway said it swung to positive adjusted earnings before interest, tax, depreciation and amortisation of EUR150 million in the second half of 2022 from negative EUR134 million in the first half, meaning it posted positive adjusted Ebitda of EUR16 million for all of 2022, swung from negative EUR350 million in 2021. The food delivery service said the performance was driven by improved revenue per order, improved delivery costs per order as well as improved overheads. Just Eat expects positive adjusted Ebitda of EUR225 million in 2023. It added that it is still actively exploring the partial or full sale of Grubhub but said there can be no certainty of an agreement.
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By Heather Rydings, Alliance News senior economics reporter
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