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(Alliance News) - Inflation remained this week's market focus, after a higher-than expected US consumer price index reading for September on Wednesday was followed by mixed indicators from China on Thursday.
US consumer price inflation was 5.4% in September, ticking up ahead of expectations for price growth to be in line with the 5.3% reported for August. The 5.4% matched July and June's readings. The core CPI reading stayed stable at 4.0%.
In China, while the annual rise consumer prices slowed in September to 0.7%, producer prices, which can later feed into consumer prices, rose by more than 10%, their fastest pace in 25 years.
Commenting on the US inflation reading, Deutsche Bank said: "The CPI release only added to speculation that the Fed would be forced to hike rates earlier than previously anticipated, and investors are now pricing in almost 4 hikes by the end of 2023, which is over a full hike more than they were pricing in just a month earlier."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.6% at 7,183.65
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Hang Seng: Hong Kong market closed for public holiday
Nikkei 225: closed up 1.5% at 28,550.93
DJIA: closed down 0.53 of a point at 34,377.81
S&P 500: closed up 13.15 points, or 0.3%, at 4,363.80
Nasdaq Composite: closed up 105.71 points, or 0.7%, at 14,571.64
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EUR: up at USD1.1598 (USD1.1575)
GBP: up at USD1.3683 (USD1.3565)
USD: up at JPY113.49 (JPY113.35)
Gold: up at USD1,793.45 per ounce (USD1,792.11)
Oil (Brent): up at USD83.90 a barrel (USD83.11)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1000 CEST Germany Ifo joint economic forecast
1100 BST Ireland consumer price index
0930 BST UK Bank of England quarterly bank liabilities survey
0830 EDT US producer price index
0830 EDT US jobless claims
1030 EDT US EIA weekly natural gas storage report
1100 EDT US EIA weekly petroleum status report
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Brussels is reportedly "preparing for the worst" as it awaits the UK's response to a series of steps it proposed to cut trade red tape across the Irish Sea. The EU Commission has laid out measures to slash 80% of regulatory checks and dramatically cut customs processes on the movement of goods, especially food and farming produce, between Britain and the island of Ireland. The UK government welcomed the announcement on Wednesday night, signalling that it wanted "intensive talks" to follow the EU's proposals, designed to tackle disruption caused by the Northern Ireland protocol. But the EU is now reportedly "preparing for the worst" from the UK in response to its proposals and fear UK Prime Minister Boris Johnson will reject the plan, according to The Guardian and The Independent newspapers. "The EU have now published their proposals in response to those in our Command Paper," a UK government spokesperson said. "We are studying the detail and will of course look at them seriously and constructively. "The next step should be intensive talks on both our sets of proposals, rapidly conducted, to determine whether there is common ground to find a solution."
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Consumer price inflation in China slowed unexpectedly in September, statistics from the National Bureau of Statistics of China showed, due to a steeper decline in the cost of food. The country's annual inflation rate was at its lowest level since March, edging down to 0.7% in September from 0.8% a month earlier and missing market estimates of 0.9%. Beijing has set a CPI growth target for 2021 of around 3%, compared with 3.5% last year. The consumer price index reading reflected a sharp drop in the cost of food, with pork prices falling faster than they did in August. Food prices declined by 5.2% in September from a year before, the slide in prices picking up pace from a 4.1% decline in August.
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China's factory inflation hit its highest level in a quarter of a century on surging commodity costs last month, with Thursday's figures fanning concerns that higher prices could filter through supply chains and into the global economy. The reopening from lockdowns around the world has ramped up demand for energy just as stockpiles are low, made worse by China's drive to meet environmental goals by slashing emissions targets. The producer price index, which measures the cost of goods at the factory gate, rose by 10.7% annually, the National Bureau of Statistics said, marking the biggest jump in its data going back to October 1996. The index had already hit a 13-year high in August, reflecting a surge in commodity prices – and piling pressure on businesses. Many factories have been forced to halt operations because of power outages caused by emissions reduction targets, the surging price of coal and supply shortages.
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Japan's industrial production declined in August, data from the Ministry of Economy Trade & Industry showed. The fall marks the second straight month of contraction in industrial output. Industrial production dropped 3.6% month-over-month in August, compared with the flash figure of a 3.2% fall and after a 1.5% decline a month earlier. The motor vehicle industry contributed significantly to the decrease, down 15% after a 3.3% drop in July.
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BROKER RATING CHANGES
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JEFFERIES CUTS JOHNSON MATTHEY TO 'UNDERPERFORM' (BUY) - PRICE TARGET 2,300 (4,200) PENCE
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BOFA CUTS ASOS PRICE TARGET TO 2,800 (5,000) PENCE - 'NEUTRAL'
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LIBERUM CUTS THG HOLDING PRICE TARGET TO 750 (1,080) PENCE - 'BUY'
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COMPANIES - FTSE 100
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Ahead of a capital markets day focused on Legal & General Capital, L&G highlighted a goal for the business of generating up to GBP600 million in profit from alternative assets by 2025. LGC, L&G's primary alternative asset manufacturer, said the event will take a look into the business and outline its goals for the future. Key ambitions include growing its alternative asset portfolio to around GBP5 billion by 2025 and generating returns on the portfolio of around 10% to 12%, with operating profit of GBP500 million to GBP600 million from alternatives by 2025. LGC as a whole is targeting operating profit of GBP600 million to GBP700 million by 2025.
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COMPANIES - FTSE 250
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QinetiQ reported a solid first quarter, but warned its full-year margin will be at the lower end of guidance. The defence technology firm said its half-year performance was in line with market consensus forecasts, with "excellent" order intake of GBP700 million, up 25% year-on-year. For the full-year, QinetiQ expects mid-single-digit organic revenue growth at around 5% but warned its underlying operating profit margin will be at the lower end of its 11% to 12% expected range. "This expectation includes short-term effects of the customer's mission shifting from Afghanistan and Covid-related delivery and supply chain challenges in the US," the firm said. QinetiQ also cautioned that it is experiencing supply issues on a "large complex programme", which it didn't name, that could result in the need for a one-off write down. It is working to cap the risk at below GBP15 million.
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Homewares retailer Dunelm reported a jump in first quarter sales and backed full-year consensus figures. Total sales in the first quarter ended September 24 rose 8.3% year-on-year to GBP388.8 million, and this was up 48% on two years ago. Gross margin dipped by around 10 basis points due to sale timing, and it still expects a full-year margin up to 75 basis points lower than the year before. "We are pleased with our performance in the first quarter, with sales growth across all channels and continued market share gains, especially given the strength of the comparative period last year, which benefited from pent-up demand following the first UK lockdown," said Chief Executive Nick Wilkinson. While noting supply chain issues, the home furnishings retailer said sales growth in the first quarter was "encouraging" and backed "recently increased" analyst consensus forecasts for its full-year pretax profit outturn. Dunelm placed current consensus at GBP179 million. Pretax profit in financial 2021, which ended June 26, was GBP157.8 million, up from GBP109.1 million in financial 2020.
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COMPANIES - MAIN MARKET AND AIM
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Motor insurance provider Sabre warned that full-year profit will be "moderately" below analyst forecasts. It said a recovery in motor insurance pricing during the third quarter has been "slightly slower" than expected as Covid-related restrictions unwind. It has maintained pricing discipline trough extended soft market conditions. Gross written premium for the nine months to the end of September was GBP126.7 million, down from GBP139.2 million a year ago. Sabre expects pretax profit for 2021 will be "moderately below" the analyst forecast range of GBP41 million to GBP46 million "but with dividend levels supported by the strength of our capital position". For 2020, Sabre recorded pretax profit of GBP49.1 million, down from GBP56.5 million in 2019. "Throughout the past quarter, we have seen some further tentative signs that market prices may be starting to correct, however we have not yet seen significant price movements indicative of a market 'turn'," the company said, though it said it is well placed to capitalise on a recovering market in 2022.
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Thursday's Shareholder Meetings
Artemis Alpha Trust PLC - AGM
BHP Group PLC - AGM
Rank Group PLC - AGM
Rurelec PLC - AGM
Sabien Technology Group PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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