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(Alliance News) - Stocks in London are expected to rally at Wednesday's open, following a shock UK inflation print.
Data from the Office for National Statistics showed headline inflation fell below 4% annually, and markedly faster than market forecasts. Core inflation also fell faster than expected, having proved fairly stubborn in recent months.
The pound dropped sharply following the print, fetching USD1.2654, compared to USD1.2715 shortly before.
"The Bank of England now certainly faces a less daunting task in steering inflation back to its 2% target next year, without necessitating a deep recession," commented Richard Carter, head of fixed interest research at Quilter Cheviot.
Meanwhile, the optimism about potential rate cuts in the US continued, helping to drive global equities higher.
Richmond Federal Reserve President Thomas Barkin entered the debate on the direction of interest rates in the coming year.
He suggested the US central bank would cut interest rates if recent progress on inflation continued in contrast to comments from other policymakers who pushed back more aggressively against rate cut bets.
"Isn't it amazing how investors ignore the hawkish Fed comments but fully embrace the dovish commentaries," mused Ipek Ozkardeskaya, Swissquote Bank senior analyst.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 91.77 points, 1.2% at 7,729.8
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Hang Seng: up 0.3% at 16,557.89
Nikkei 225: closed up 1.4% at 33,675.94
S&P/ASX 200: closed up 0.7% at 7,537.90
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DJIA: closed up 0.7%, at 37,557.92
S&P 500: closed up 0.6% at 4,768.37
Nasdaq Composite: closed up 0.7% at 15,003.22
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EUR: down at USD1.0958 (USD1.0972)
GBP: soft at USD1.2654 (USD1.2734)
USD: down at JPY143.71 (JPY143.88)
Gold: up slightly at USD2,041.49 per ounce (USD2,039.44)
Oil (Brent): up at USD79.31 a barrel (USD78.81)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
10:00 CET EU balance of payments
11:00 CET EU construction output
16:00 CET EU FCCI flash consumer confidence indicator
09:30 GMT UK house price index
07:00 EST US MBA weekly mortgage applications survey
10:00 EST US existing home sales
10:00 EST US consumer confidence index
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UK consumer price inflation cooled faster than expected last month, according to data from the Office for National Statistics on Wednesday. The ONS said the consumer price index rose 3.9% annually in November, cooling sharply from the 4.6% increase recorded in October. The inflation reading came in below FXStreet-cited market consensus of 4.4%. The recent peak for annual inflation in the UK was 11.1% in October 2022, which the ONS estimated to be the highest since 1981. November's reading was the lowest since September 2021. The largest downward contributions in November came from transport, recreation and culture, and food and non-alcoholic beverages, the ONS said. Core consumer prices, which exclude energy, food, alcohol and tobacco, rose 5.1% annually, coming in below market expectations of a 5.6% rise. They had increased by 5.7% in October.
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The ONS also reported data for producer input prices. On a monthly basis, producer input prices fell 0.3% in November, after rising 0.5% the prior month, which was revised from 0.4%. Annually, producer input prices declined 2.6% in November, matching the pace seen in the previous month. Market forecasts had been expected a 3.3% drop. Input prices haven fallen on an annual basis for six months in a row.
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China President Xi Jinping said that maintaining close ties with Russia is a "strategic choice", calling for deeper bilateral cooperation during a meeting with Prime Minister Mikhail Mishustin in Beijing, state media reported. The strong relationship between the two nations, which has endured despite Russia's military invasion of its neighbour Ukraine in early 2022, has faced pointed criticism from Western leaders in recent years. "Maintaining and developing China-Russia relations is a strategic choice made by both sides based on the fundamental interests of the two peoples," Xi told Mishustin on Wednesday in Beijing's Great Hall of the People, Chinese state broadcaster CCTV reported.
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UK Prime Minister Rishi Sunak is on course for a fierce battle with Labour in a new year by-election after MP Peter Bone's voters backed a recall petition to oust him from the Commons. North Northamptonshire Council confirmed on Tuesday that 13.2% of the electorate in Wellingborough backed a petition to recall their Westminster representative, passing the 10% threshold required for a by-election contest. The petition had been prompted when Bone was handed a six-week suspension from the House of Commons after an inquiry found he had subjected a staff member to bullying and sexual misconduct. He has been sitting as an independent after losing the Conservative whip in the aftermath of the ruling. Labour said voters in his Northamptonshire constituency had the "opportunity to vote for a fresh start" as Keir Starmer's party, which is riding high in opinion polls, eyes up another Conservative scalp.
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BROKER RATING CHANGES
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UBS cuts DS Smith to 'neutral' (buy) - price target 332 (361) pence
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Goldman Sachs cuts Reckitt Benckiser price target to 5,900 (6,680) pence - 'neutral'
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COMPANIES - FTSE 100
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Shell said its subsidiary Shell Offshore announced its final investment decision for Sparta, a deep-water development in the US Gulf of Mexico, expecting to begin production in 2028. The London-based oil major owns 51% of Shell Offshore, with Equinor Gulf of Mexico, part of Stavanger, Norway-based Equinor, owning 49%. Shell said Sparta is expected to reach a peak output of about 90,000 barrels of oil equivalent per day and currently has an estimated discovered recoverable resource volume of 244 million barrels of oil equivalent. It will be Shell's 15th deep-water host in the Gulf of Mexico and is scheduled to begin production in 2028. "Shell's latest deep-water development demonstrates the power of replication, driving greater value from our advantaged positions," said Zoe Yujnovich, director of Integrated Gas & Upstream. Shell added: "Building on more than 40 years of deep-water expertise, Sparta also marks Shell's first development in the Gulf of Mexico to produce from reservoirs with pressures up to 20,000 pounds per square inch."
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Anglo American reported that annual rough diamond sales at De Beers crashed, but the strong monthly performance indicated that stock levels are stabilising in the diamond industry. The London-based mining company said provisional rough diamond sales value for the tenth sales cycle of 2023 plunged to USD130 million, from USD417 million in the same cycle last year. On a monthly basis, however, sales surged 51% from USD86 million in the ninth cycle in 2023. As the end-of-year holiday season progresses, the company is seeing signs that the diamond industry is regaining its balance between wholesale supply and demand.
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COMPANIES - FTSE 250
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Specialty pharmaceutical firm Indivior said it has settled a patent dispute with Teva subsidiary Actavis concerning the latter's abbreviated new drug application for generic buprenorphine and naloxone sublingual film. "Under the agreement, Indivior granted Actavis a license to U.S. Patent No. 11,135,216 that would enable Actavis to launch the generic film products identified in its ANDA in the United States no earlier than January 31, 2025, unless the unexpired patent claims are found invalid or unenforceable before that time in a final judicial decision," Indivior explained.
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OTHER COMPANIES
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Energy infrastructure firm Petrofac announced said it has seen "exceptional" new order intake across Engineering & Construction and Asset Solutions, totalling USD6.8 billion in 2023 so far. It expects the backlog to be around USD8.0 billion by the year. It announced the second contract award under the six-project USD14 billion framework agreement with TenneT, working alongside Hitachi Energy, with Petrofac's portion of the contract worth around USD1.4 billion. "Our focus on rebuilding the backlog and unwinding historic working capital has resulted in tangible progress against our organic plan to strengthen the Group’s financial position," said CEO Tareq Kawash. It expects revenue of about USD2.5 billion in 2023, in line with guidance, and a business performance loss before interest and tax of around USD180 million.
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East Africa-focused gold company Shanta Gold said it has agreed on the terms of a takeover by Saturn Resources, a subsidiary of ETC Holdings. Saturn is offering 13.5 pence per share, which marks a 6.7% premium to the closing price of 12.65p on Tuesday. Shanta said its largest shareholder has signed an irrevocable undertaking to vote in favour of the deal, while its second-largest shareholder has signed a letter of intent to do so. It also has the greenlight from its independent directors, who have been advised by Liberum. ETC invests in a diverse range of industries, mostly via its controlling stake in ETC Group, which trades as ETG. "Whilst the Independent Shanta Directors have confidence in Shanta's ability to deliver on its business plan and to continue to deliver strong results and growth in the future, this is an all-cash offer at a premium to the current price when the gold price is close to an all-time high. As such it provides an exit opportunity in cash for all shareholders taking into account the current gold price as well as the operational and other risks inherent in the business," said Shanta Chair Tony Durrant.
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By Elizabeth Winter, Alliance News deputy news editor
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