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(Alliance News) - Stocks in London are set for a lower open on Friday amid investor worries over a higher-than-expected US inflation reading and likely resulting Federal Reserve monetary policy tightening.

In early UK data, figures showed the economy rebounded to grow by 7.5% in 2021 after a 9.4% decline in pandemic-battered 2020.

In company news, British American Tobacco unveiled a GBP2 billion share buyback programme after making headway with its 'new categories' division in 2021.

IG says futures indicate the FTSE 100 index of large-caps to open down 60.30 points, or 0.8%, at 7,612.10 on Friday. The FTSE 100 closed up 28.98 points, or 0.4%, at 7,672.40 on Thursday.

"The initial optimism that we might see evidence that US inflation might be slowing, and that had helped push US markets higher at the start of this week, sharply evaporated in the aftermath of yesterday's CPI numbers," said Michael Hewson, chief market analyst at CMC Markets.

Data on Thursday showed US consumer prices rose at their fastest pace in 40 years in January, ramping up pressure on the Federal Reserve to tighten monetary policy at its meeting next month.

On an annual basis, the US consumer price index rose 7.5% in January, picking up steam from a rise of 7.0% in December. The latest annual inflation rate was the highest since February of 1982 and was above market forecasts of 7.3%.

Compounding Wall Street jitters, Fed official James Bullard said he wanted to see interest rates lifted by one percentage point by the start of July.

The St Louis Fed boss said he was in favour of a 50 basis point lift next month – double the usual 25 point rise and the first since 2000 – and two more after that.

"I'd like to see 100 basis points in the bag by July 1," Bullard, who has a vote on policy this year, told Bloomberg News. "I was already more hawkish, but I have pulled up dramatically what I think the committee should do."

In New York on Thursday, Wall Street ended lower, with the Dow Jones Industrial Average down 1.5%, the S&P 500 down 1.8% and the Nasdaq Composite down 2.1%

Hewson said: "Today's focus, while likely to be on whether US markets follow through on yesterday's falls, is also set to be focussed on the UK economy as we get the first iteration of Q4 GDP, December GDP and the industrial and manufacturing production for December."

The UK economy declined more moderately than expected in December as the Omicron variant hit.

GDP shrank 0.2% month-on-month in December, having been expected to tumble 0.6%, according to market consensus cited by FXStreet. However, this still marked a deterioration from growth of 0.7% in November.

Services output fell by 0.5% in December but remained 0.5% above pre-virus levels. The sector was dented by the Omicron variant in December, which saw a wave of hospitality cancellations as jitters over the virus grew ahead of Christmas and swathes of the population had to self isolate.

In the fourth quarter of 2021, GDP grew 1.0% on a sequential basis, at this level 0.4% below pre-pandemic times, though the Office for National Statistics noted that December's GDP figure matched pre-coronavirus levels.

November 2021 remains the first month that GDP recovered to above its pre-coronavirus levels, by 0.3%.

For 2021 overall, GDP increased 7.5% after a 9.4% fall in 2020.

Sterling was quoted at USD1.3532 following the data early Friday, down a penny from USD1.3629 at the London equities close on Thursday.

In early UK company news, British American Tobacco approved a GBP2 billion share buyback programme after making headway with its 'new categories' division in 2021.

Revenue for 2021 slipped 0.4% to GBP25.68 billion from GBP25.78 billion the year before, though pretax profit increased 5.7% to GBP9.16 billion from GBP8.67 billion. Profit was helped by lower finance costs and depreciation, amortisation & impairment costs.

Constant currency adjusted diluted earnings per share growth of 6.6% to 329.0 pence was at the top end of guidance, BAT said. It expects this to grow in the high-single figures in 2022.

The Dunhill cigarette maker highlighted that revenue from 'new categories' - such as vapour and tobacco heating products - grew well ahead of the group as a whole last year, up 42% to GBP2.05 billion. Non-combustible consumers grew by 4.8 million to 18.3 million and non-combustible products now account for 12% of group revenue, up from 4% in 2017.

Further, 'new categories' has a "clear pathway" to profitability by 2025.

BAT lifted its annual dividend by 1.0% to 217.80p and set out plans for a GBP2 billion share buyback this year.

"With leverage within our target range and expectations for about GBP40 billion of free cash flow before dividends over the next five years we will continue to invest in a faster transformation and deliver strong returns to shareholders. In addition to maintaining a growing dividend the board has approved a GBP2 billion share repurchase programme for 2022," added Chief Executive Jack Bowles.

Food and beverage ingredients maker Tate & Lyle said trading quarter trading was in line with expectations and its outlook is unchanged.

Food & Beverage Solutions revenue grew 19% at constant currency in the three months to December 31, while Sucralose revenue was up 8%. For total continuing operations, revenue grew 18%.

"We enter 2022 in a strong position. Our new business pipeline in Food & Beverage Solutions is healthy and in both our businesses we have renewed 2022 calendar year customer contracts that offset inflation. In addition, the transaction we announced last year to create two focused businesses is progressing well and we remain on track for completion at the end of March," said Chief Executive Nick Hampton.

Speciality chemicals firm Victrex said it saw a "solid" start to its 2022 financial year. Revenue of GBP74.6 million in the three months to December 31 was up 9% on a year ago and sales volume of 1,025 tonnes was 16% ahead.

"Expectations for the full year are unchanged at this early stage. Whilst we anticipate further volume improvement across several end markets, we are mindful of headwinds including currency, raw material costs and increasing energy inflation. Overall, we continue on plan to deliver year-on-year growth in FY 2022," said Chief Executive Jakob Sigurdsson.

However, he did flag that energy and raw material cost inflation mean that margin improvement may be held back, particularly in the second half.

The euro traded at USD1.1383 early Friday, down from USD1.1488 late Thursday in London. Against the yen, the dollar was quoted at JPY116.06, up from JPY115.84.

In China, the Shanghai Composite ended down 0.7%, while the Hang Seng index in Hong Kong was down 0.4%. The S&P/ASX 200 in Sydney ended down 1.0%. Financial markets in Japan are closed for National Foundation Day.

Gold was quoted at USD1,823.79 an ounce early Friday, lower than USD1,839.85 on Thursday. Brent oil was trading at USD90.87 a barrel, down from than USD92.78 late Thursday.

By Lucy Heming; lucyheming@alliancenews.com

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