LONDON MARKET CLOSE: Stocks lack direction; UK inflation slows

(Alliance News) - Stocks in London ended mixed on Wednesday as investors digested slowing UK inflation figures as calls for an interest rate hike intensify, as earnings season continues.

The FTSE 100 index closed up 5.57 points, or 0.1%, at 7,223.10. The FTSE 250 closed down 87.42 points, or 0.4%, at 22,966.67 and the AIM All-Share closed down 1.81 point, or 0.2%, at 1,238.09.

The Cboe UK 100 ended up 0.1% at 716.80, the Cboe UK 250 closed down 0.6% at 20,71.00 and the Cboe Small Companies ended down 0.2% at 15,573.40.

The CAC 40 stock index in Paris ended up 0.5% and the DAX 40 in Frankfurt ended up 0.1%.

CMC Markets analyst Michael Hewson said: "It's been a rather slow day for markets in Europe today with little in the way of direction one way or the other, with the focus largely on company results and rising inflation risks, with the FTSE 100 on course to trade in its smallest daily range this year.

"By and large companies are reporting decent numbers with an ability to pass on rising costs, without a significant impact on their sales growth numbers. While that is encouraging given the build-up in savings levels over the pandemic, most of this ability to pass on these costs predates the recent surge in energy prices, which means that the barriers to it continuing are growing."

In the FTSE 100, Vodafone ended the best performer, up 2.4%. The telecommunications firm's Indian unit, Vodafone Idea, informed the Indian government it will accept the four-year spectrum payment moratorium, becoming the first telecom to accept the deferred payment option provided under a relief package.

India's Department of Telecommunications has contacted operators to see if they are interested in a four-year freeze on spectrum payments and adjusted gross revenue payments.

Shares in Vodafone Idea closed up 7.0% in Mumbai. FTSE 250-listed Airtel Africa - which is majority owned by the Indian communication services company Bharti Airtel - closed up 2.1%.

Burberry Group closed up 2.3% after the UK fashion house named Versace's Jonathan Akeroyd as its new chief executive.

Akeroyd was credited by Burberry as "reorganising and accelerating growth" at Italian fashion house Versace. He was previously CEO of British luxury brand Alexander McQueen. Burberry said he "led a turnaround of the British luxury brand and laid the foundation for global expansion".

Burberry's current CEO Marco Gobbetti will leave the fashion house at the end of 2021, with Akeroyd taking up the role on April 1, 2022. In the meantime, Chair Gerry Murphy will chair the executive committee.

At the other end of the large-caps, International Consolidated Airlines Group ended the worst performer, down 4.9%, after Peel Hunt downgraded the British Airways parent to Hold from Buy.

In travel sector news, Morocco is banning flights to and from the UK due to rising coronavirus case rates.

Airlines cancelled several flights between the countries on Wednesday ahead of the suspension coming into effect at 2359 BST.

Latest figures from the European Centre for Disease Prevention and Control show that the North African nation's weekly rate of reported coronavirus cases on October 14 stood at just 10.4 per 100,000 people. The current rate in the UK is 445.5 per 100,000 people.

Budget airline easyJet cancelled two flights from Gatwick and Manchester to Marrakech on Wednesday, but will operate flights in the opposite direction to bring passengers back to the UK before the ban comes into force. The stock closed down 3.6%, while Tui was worst midcap stock down 6.7%.

Rio Tinto closed down 3.3% after the Anglo-Australian miner said it is tripling its carbon emissions reduction target and is now hoping to cut those emissions by 50% by 2030.

By 2025, Rio is targeting a 15% reduction in its Scope 1 & 2 carbon emissions, which is five years earlier than previously. The miner noted these targets are supported by around USD7.5 billion of direct investments to lower emissions between 2022 and 2030.

The reduction are based on a baseline from 2018 of 32.6 million tonnes. To support this growth the miner said its capital expenditure is likely to reach USD9 billion and USD10 billion in 2023 and 2024, respectively.

Antofagasta lost 1.0% after the Chilean copper miner backed its 2021 copper production guidance, but moderated warned output is set to dip next year.

In the third quarter ended September 30, copper output reached 181,100 tonnes, up 1.5% from 178,400 tonnes in the previous quarter. Higher output reflected increased production at Centinela, offset by lower throughput at Los Pelambres.

Antofagasta maintained its full-year copper production guidance of 710,000 to 740,000 tonnes. For 2022, however, it now expects slightly lower output of between 660,000 and 690,000 tonnes.

Elsewhere, Deliveroo closed up 3.7% after the food delivery firm lifted its outlook after a "strong" third quarter, even as pandemic restrictions largely eased.

Deliveroo posted annual growth in gross transaction value of 54% in the third quarter of 2021 at GBP1.59 billion, describing orders as "resilient" despite lockdown restrictions being eased in the UK. It did note a "modest" reduction in average order value, with this slipping 6% year-on-year to GBP21.4 from GBP22.8.

On the back of this, Deliveroo raised its full-year gross transaction value guidance to growth of 60% to 70%, versus prior guidance of 50% to 60%. Its margin outlook was unchanged, seen in a range of 7.50% to 7.75%.

The pound was quoted at USD1.3820 at the London equities close, up from USD1.3800 at the close Tuesday, even after data showed UK inflation unexpectedly slowed in September against growing calls for a UK interest rate hike.

The annual UK inflation rate eased a touch last month, data showed on Wednesday, but still remains above the Bank of England's 2% target.

The consumer price index rose 3.1% year-on-year in September, slowing from August's 3.2% growth. Analysts had been expecting the September reading to remain stable at 3.2%, according to FXStreet.

Month-on-month, prices rose 0.3%, again slowing from August's 0.7% rise.

The data comes after recent comments from Bank of England Governor Andrew Bailey that the UK central bank will have to act to ease inflationary pressures - leading to warnings from economists that the BoE could raise rates as soon as its next meeting on November 4.

"It's unlikely to significantly reduce expectations that the BoE will raise interest rates before the end of the year," said Capital Economics economist Paul Dales.

The calls for a rate hike come as the UK grapples with higher commodity prices heading into winter, supply chain issues and an alarming rise in Covid-19 cases as protection from vaccines starts to wane.

Robert Alster, chief investment officer at Close Brothers Asset Management, said: "Inflation rates steadied in September, but in true post-pandemic style this already paints a picture of a bygone era. October has brought spiralling energy prices, significant supply shocks, and creeping wages. All of these mean the likelihood of inflation climbing, however temporarily, is high.

"Andrew Bailey warned that tightening monetary policy won't combat supply squeezes, so the Bank of England is right to hold its horses. What's more, the true impact of the current economic climate is yet to be seen, especially the end of the furlough scheme. Redundancy data is still subdued, and vacancies are strong; this could lead us towards a high wage, low unemployment environment, but it could also reveal a skills mismatch which means high unemployment and only sector-specific earnings growth. If the issue only lies in pockets of the economy, a one-size-fits-all policy feels short-sighted, so the Bank ought to tread cautiously until the dust settles."

The euro stood at USD1.1647 at the European equities close, up from USD1.1640 late Tuesday after data showed inflation on the continent accelerated.

The annual inflation rate in the eurozone was 3.4% in September, picking up from 3.0% in August and confirming an earlier flash reading.

The highest contribution to September's inflation rate came from energy prices, followed by services and non-energy industrial goods.

Month-on-month, prices rose 0.5%, the pace nudging up from the 0.4% growth recorded for August.

Against the yen, the dollar was trading at JPY114.24, little changed from JPY114.23 late Tuesday.

Stocks in New York were higher at the London equities close as markets digested another round of mostly solid earnings.

The DJIA was up 0.4%, the S&P 500 index up 0.3% and the Nasdaq Composite 0.1%.

On the corporate front, Verizon climbed 1.6% after earnings topped analyst expectations as the telecommunications firm reported higher gains in profit and revenue on broadband subscriber growth.

Brent oil was quoted at USD85.02 a barrel at the equities close, up sharply from USD84.64 at the close Tuesday.

Gold stood at USD1,783.82 an ounce at the London equities close, higher against USD1,772.17 late Tuesday.

The economic events calendar on Thursday has UK public sector finance figures at 0700 BST and the latest US jobless claims numbers at 1330 BST.

The UK corporate calendar on Thursday has third-quarter results from lender Barclays, wealth manager St James's Place, information and analytics provider RELX and consumer goods firm Unilever.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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