LONDON MARKET CLOSE: FTSE 100 claws back gains late in the day

(Alliance News) - Stock prices in London closed mostly in the green on Thursday, managing to shake off losses from earlier in the day following a US inflation print.

The FTSE 100 index closed up 24.12 points, 0.4%, at 6,850.27. The FTSE 250 ended up 318.10 points, 1.9%, at 16,929.26 and the AIM All-Share closed down 0.1%, or 0.5 of a point, at 775.77.

The Cboe UK 100 ended up 0.4% at 684.69, the Cboe UK 250 closed up 1.9% at 14,496.38, and the Cboe Small Companies ended down 1.4% at 12,137.46.

In European equities on Thursday, the CAC 40 in Paris ended up 1.1%, while the DAX 40 in Frankfurt ended up 1.5%.

Stocks had been sent into the red after a hotter-than-expected US CPI print, before a sudden recovery in the late afternoon.

"This has 'squeeze' written all over it...In the aftermath of the hotter US CPI report, we saw risk assets tumble as the dollar and bonds jumped. Much – or in some cases, all – of those moves have since been undone due to profit-taking, while banks and energy stocks rose thanks to even higher yields and rebounding crude oil prices," commented City Index and FOREX.com analyst Fawad Razaqzada.

"What a turnaround!"

The pound was quoted at USD1.1340 at the London equities close Thursday, sharply higher compared to USD1.1066 at the close on Wednesday.

Prime Minister Liz Truss was under fire from her own members of parliament as they demanded more U-turns on her tax-slashing agenda after she ruled out spending cuts to balance the books.

MPs piled pressure on her to restore market confidence in her government, with reports suggesting she is facing mounting calls to reverse or delay her plan to cancel a rise in corporation tax from 19% to 25%, due in April.

"There have been rumours of a meeting between number 10 and the Treasury to discuss possible u-turns including on corporation tax which would be another humiliating climb down, albeit one that is boosting the pound which now trades almost 1.5% higher against the dollar today," said Craig Erlam, senior market analyst at Oanda.

However, Chancellor Kwasi Kwarteng later sought to quash such rumours. Both Kwarteng and Downing Street insisted there were no plans for further changes to the package.

Speaking at an event in Washington, when asked if a corporation tax U-turn was on the cards, he said: "What I'm totally focused on is delivering on the mini-budget."

Asked if both he and Truss would still be in office in a month, Kwarteng said: "Absolutely 100%. I am not going anywhere."

The euro stood at USD0.9772 at the European equities close on Thursday, up against USD0.9702 at the same time on Wednesday.

Against the yen, the dollar was trading at JPY147.19, higher compared to JPY146.90 late Wednesday.

The US currency saw a boost from high-than-expected inflation data, which is likely to seal the deal for further interest rate hikes from the Federal Reserve.

Consumer price rises in the US slowed slightly in September. The consumer price index rose 8.2% annually in September, slowing from the 8.3% rise recorded in August.

Market consensus, according to FXStreet, had predicted inflation would ease in September to 8.1%.

The CPI figures all but secured a 75 basis point rate hike from the Federal Reserve next month. CME's FedWatch tool now shows a 97% probability, compared to 85% on Wednesday.

Stocks in New York had initially not taken the news well, but saw a sudden rally shortly before the London equities close. The DJIA was up 1.3%, the S&P 500 index was up 1.1%, and the Nasdaq Composite up 0.7%.

In London, British Airways parent company International Consolidated Airlines ended the day up 8.3%. It said it now expects its pre-exceptional operating profit for the third quarter to be around EUR1.2 billion due to passenger revenue strength.

Forward bookings remain at expected levels for the time of year, the company noted. As a result, its fourth quarter expectations remain unchanged.

Hargreaves Lansdown's Sophie Lund-Yates commented: "There is still a long way to go before any champagne can be popped. Consumer behaviour is yet to fully adjust to a world of higher inflation and increased costs. If spending starts to rein in, the strong forward order book may well come under pressure. Then there’s the question of IAG’s eye watering debt pile, following huge liabilities taken on to get through the worst of the pandemic storm.

"Ultimately, this upgrade from expectations is a very welcome surprise, but whether the spritely mood music can be maintained is another question entirely," Yates added.

Fellow airline easyJet said it expects to report a headline pretax loss in the range of GBP170 million to GBP190 million for its financial year that ended September 30, narrowed from a pretax loss of GBP1.14 billion the year prior.

easyJet explained that the loss in the recent year includes a GBP64 million FX loss from balance sheet revaluations and incremental disruption costs of GBP75 million, mainly from operational issues experienced across the industry in its third quarter.

easyJet closed up 1.2%.

Bluechip bank NatWest was a top performer, adding 7.7%. It said it will close 43 bank branches in the UK, as it continues to transition to online banking services.

Several branches in Scotland, including in Edinburgh, Glasgow and Aberdeen, are among the fresh wave of closures.

The high street lender said the vast majority of its retail banking services can be done digitally, and it is the quicker and easier way to bank. Just six jobs are expected to be put at risk as part of the closures, indicating most branch staff will be offered the opportunity to take up a role in a different branch or another part of the business.

Meanwhile on AIM, Distil shed 22%. The London-based premium drinks said its pretax loss in the six months ended September 30 widened to GBP555,000 from just GBP45,000 a year before. Revenue fell 68% to GBP460,000 from GBP1.4 million.

Distil moved towards direct sales of its products during the first half instead of selling through a distributor.

"UK sales are adversely impacted by the removal of inventory from the distributor supply chain as it transitioned away from its UK distributor and to direct sales during Q2", Distil explained.

While the firm expects continued cost pressure in the short to medium-term, it said the spirits market continues to perform well in the UK. It will maintain its efforts to mitigate price inflation.

Brent oil was quoted at USD94.07 a barrel at the London equities close Thursday, up from USD92.55 late Wednesday. Gold was quoted at USD1,665.31 an ounce, lower against USD1,670.16.

In Friday's corporate calendar, there will trading statements from paper and packing firm Mondi, technology and finance startup investor Chrysalis Investments, and investment manager Jupiter Fund Management.

The economic calendar for Friday has China producer and consumer inflation overnight, German wholesale price index at 0700 BST, US retail sales at 1330 BST. The IMF and World Bank hold their annual meetings, and there will be comments from Federal Reserve Governor Lisa Cook.

By Elizabeth Winter; elizabethwinter@alliancenews.com

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