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LONDON BRIEFING: Leap in UK inflation gives BoE something to ponder

Wed, 15th Sep 2021 08:06

(Alliance News) - UK consumer price growth increased in August, showing the quickest acceleration since records began, data on Wednesday revealed.

The UK annual inflation rate jumped to 3.2% in August from 2.0% in July. According to consensus cited by FXStreet, a smaller increase to 2.9% was expected.

"The increase of 1.2 percentage points is the largest ever recorded increase in the CPI National Statistic 12-month inflation rate series, which began in January 1997," the Office for National Statistics said.

On a monthly basis, consumer prices rose 0.7% in August, having been flat in July.

In August of last year, consumer prices had fallen 0.4% monthly and had risen 0.2% annually.

ONS analyst Jonathan Athow commented: "August [2021] saw the largest annual inflation month-on-month since the series was introduced almost a quarter of a century ago. However, much of this is likely to be temporary as last year restaurant and cafe prices fell substantially due to the 'Eat Out to Help Out' scheme, while this year, prices rose."

Separate data showed producer price growth in the UK also topped market expectations. Output producer price inflation accelerated to 5.9% in August from 5.1% in July. A less steep climb to 5.4% was expected, according to FXStreet.

Economists at Lloyds Bank said the consumer price inflation figure of 3.2% beat their own prediction of 3.0%, but they also noted that it mostly reflected base effects from last year's VAT cut and the restaurant support scheme.

"The rise keeps inflation on track to meet the Bank of England’s forecast for 4% by the end of the year, with supply constraints driving up costs. Inflation is expected to fall next year, but it will certainly be something that Bank of England policymakers will want to discuss during next week’s monetary policy assessment, although many of them have also previously said that they expect rises to be temporary," Lloyds said.

Here is what you need to know at the London market open:



MARKETS



FTSE 100: down 0.9% at 7,027.91



Hang Seng: down 1.7% at 25,075.52

Nikkei 225: closed down 0.5% at 30,511.71

DJIA: closed down 292.06 points, or 0.8%, at 34,577.57

S&P 500: closed down 25.68 points, or 0.6%, at 4,443.05

Nasdaq Composite: closed down 67.82 points, or 0.5%, at 15,037.76



EUR: down at USD1.1808 (USD1.1821)

GBP: down at USD1.3830 (USD1.3845)

USD: down at JPY109.47 (JPY109.65)

Gold: down at USD1,802.17 per ounce (USD1,807.10)

Oil (Brent): up at USD74.06 a barrel (USD73.74)

(changes since previous London equities close)



ECONOMICS AND GENERAL



Wednesday's Key Economic Events still to come

1100 CEST EU industrial production

0930 BST UK ONS house price index

1100 BST Ireland goods exports and imports

0830 EDT US import & export price indexes

0915 EDT US industrial production

1030 EDT US EIA weekly petroleum status report



Growth in China's retail sales slowed to a 12-month low in August, data showed, as parts of the country were hit by lockdowns and other containment measures to fight the worst Covid outbreak since its initial spread in 2020. Retail sales grew 2.5% last month, well short of the 7% forecast and sharply down from the 8.5% witnessed in July. The reading was the lowest since August 2020. Industrial production growth was also slightly below expectations and slower than the month before. The data comes after a string of figures indicating the recovery enjoyed last year and at the start of 2021 by the world's second largest economy was petering out.



Republican leaders in Congress on Tuesday continued to withhold support for efforts by the Democratic majority to increase the US debt ceiling. Treasury Secretary Janet Yellen warned last week that the US government will run out of money next month unless lawmakers take action, and banking groups have urged Congress to move to prevent "irreparable harm" to the US economy. The Securities Industry & Financial Markets Association, American Bankers Association and other industry groups said in a letter to congressional leaders that defaulting "on our existing obligations would be irresponsible and do irreparable harm to the US economy and taxpayers." But Republican Senate Minority Leader Mitch McConnell said Democrats will have to resolve the issue on their own. "The Democratic leaders have every tool and procedure they need to handle the debt limit on a partisan basis, just like they are choosing to handle everything else," McConnell said on the Senate floor. Congress is currently considering a USD1.2 trillion infrastructure plan that has the backing of Democrats and some Republicans. Also on their agenda is a massive social spending plan costing USD3.5 trillion over 10 years, which has only garnered the support of Democrats.



BROKER RATING CHANGES



HSBC RAISES COMPASS GROUP TO 'BUY'



RBC CUTS JTC TO 'SECTOR PERFORM' ('OUTPERFORM') - TARGET 830 (675) PENCE



COMPANIES - FTSE 250



Trustpilot, which floated earlier this year, said revenue in the six months to June 30 grew 31% year-on-year to USD62.4 million from USD47.7 million. However, its pretax loss widened to USD17.3 million from USD6.4 million. General and administrative expenses almost trebled annually to USD30.1 million from USD11.5 million. Trustpilot also lifted its outlook. It previously expected constant currency revenue growth in the "high-teens". It now expects growth at similar levels to the 28% constant currency revenue surge from the first half.



COMPANIES - MAIN MARKET, AIM AND OTHER



Darktrace, another recent London listing that will soon join the FTSE 250 index, said revenue in the financial year that ended June 30 surged. However, its loss ballooned. The cybersecurity firm's revenue jumped 41% to USD281.3 million from GBP199.1 million. Growth was "robust" across all its markets. However, its pretax loss widened considerably to USD147.6 million from USD26.9 million. Finance costs soared to USD109.2 million from USD2.4 million. These non-cash costs were related to convertible loan notes issued to some shareholders back in July 2020. "These notes and associated finance costs were eliminated upon conversion to equity with the IPO," Darktrace noted. The company raised its revenue guidance for financial 2022 to between 35% and 37% growth from 29% to 32% growth previously forecast.



Drink mixers maker Fevertree saw revenue rise 36% over the same six-month period. Revenue came in at GBP141.8 million, improved from GBP104.2 million a year earlier. Pretax profit increased 17% year-on-year to GBP25.3 million from GBP21.7 million. It lifted its interim payout by 2.0% to 5.52 pence from 5.41p. Profit rose despite logistics disruption and cost pressures hitting margins. Its gross margin slipped to 44.1% from 46.8% a year earlier. Chief Executive Tim Warrillow said: "I am pleased to report an excellent sales performance for the first half of the year. Our ambition and confidence in the global opportunity continues to grow and we have been encouraged by the initial re-opening of the On-Trade, the ongoing strength of the Off-Trade with sales exceeding pre-Covid levels across all our regions, as well as the response to our new product launches, all of which is a testament to our increasing brand strength, growing presence, marketing investments, and relationships across the industry."



JP Morgan has been appointed by the UK government to provide advice on Channel 4's future following a consultation into the possible privatisation of the public broadcaster. UK Culture Secretary Oliver Dowden is understood to have approved the US investment bank to provide corporate finance advice on the broadcaster's remit, ownership and obligations, PA reported. The appointment has not been officially confirmed by the Department for Digital, Culture, Media & Sport, but an announcement is expected on Wednesday. The broadcaster was founded in 1982 and currently is owned by the government and receives its funding from advertising. But ministers launched a consultation into a potential change in ownership of the channel in July.



COMPANIES - GLOBAL



Swiss Re has partnered with BlaBlaCar, a travel platform, and motor insurer L'olivier Assurance, the French branch of Admiral Group. The partnership has enabled the creation of BlaBlaCar Coach, a smartphone app that offers drivers personalised coaching and tips for safer driving and is available with annual car insurance. The collaboration will advance innovation in the French mobility market, Zurich-based reinsurance company Swiss Re claimed, with the aim of improving road safety and making mobility more sustainable.



Wednesday's Shareholder Meetings

Dixons Carphone PLC - AGM

Games Workshop Group PLC - AGM

Grafenia PLC - AGM

Hipgnosis Songs Fund Ltd - AGM

Hornby PLC - AGM

Intercede Group PLC - AGM

Marlowe PLC - AGM

NB Private Equity Partners Ltd - AGM

Omega Diagnostics Group PLC - AGM



By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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