LONDON MARKET MIDDAY: Stocks rise as markets brace for US inflation

(Alliance News) - Stock prices in London were higher at midday on Wednesday following Senate testimony by the US Fed Chair Jerome Powell on Tuesday, during which he promised to not let inflation get out of hand.

Hot on the heels of Powell's remarks is a US inflation reading before the New York open.

The US consumer price index print for December is expected to show the highest rate of inflation in 40 years at 7.0%, following a 6.8% annual rise in November. It is due at 1330 GMT.

The FTSE 100 index was up 56.16 points, or 0.7%, at 7,544.53 midday in London. The mid-cap FTSE 250 index was up 66.37 points, or 0.3%, at 23,094.55. The AIM All-Share index was up 2.34 points, or 0.1%, at 1,175.98.

The Cboe UK 100 index was up 0.9% at 748.61. The Cboe 250 was up 0.1% at 20,593.62 and the Cboe Small Companies up 0.1% at 15,648.00.

The CAC 40 stock index in Paris was up 0.3%, while the DAX 40 in Frankfurt was 0.4% higher.

"Stock markets around Europe rose after an upbeat session on Wall Street driven by a recovery in tech stocks as the rise in bond yields eased. Fed Chair Jay Powell offered reassurance in his reappointment hearing, though he talked about the possibility of raising rates faster than expected if inflation remains persistent. All eyes on today's US CPI print - expected at another 40-year high," said Markets.com analyst Neil Wilson.

New York was pointed to a slightly higher open. The Dow Jones Industrial Average was called 0.1% higher, the S&P 500 up 0.1%, and the Nasdaq Composite up 0.2%, based on futures trading.

In the FTSE 100, J Sainsbury was up 1.8% after the supermarket chain said its investment in value, new products and service drove volume market share gains, trading ahead of the overall UK market through its financial third quarter and the key Christmas period.

For the 16 weeks to January 8, total retail sales - excluding fuel - was down 5.3% following 6.8% growth in third quarter of financial 2021.

Last week, market research firm Kantar, in its latest UK grocery market survey, had said Sainsbury's suffered a 4.4% annual decline in sales to GBP4.97 billion in the 12 weeks that ended December 26. The overall market was down 3.0% from a year before in the same period, Kantar said.

However, Sainsbury's on Wednesday noted that Groceries Online sales grew by 92% versus two years ago, with weekly orders increasing again in recent weeks to over 700,000 per week. Orders in Christmas week were up 41% year-on-year.

Looking ahead, Sainsbury said it is raising annual profit guidance, reflecting strong grocery sales, cost savings delivery, and an improved outlook for Sainsbury's Bank.

For the financial year that ends in March, it expects to report underlying pretax profit of at least GBP720 million, having posted underlying pretax profit of GBP356 million in financial 2021. In addition, the latest figure was up from the GBP660 million Sainsbury's had forecast last July.

Rival grocer Tesco gives its Christmas trading update on Thursday. It was up 0.2%.

Insurer Phoenix Group was among the worst blue-chip performers, down 0.7% at 680.00 pence. Swiss Re sold 66.2 million shares in Phoenix Group at 664p each, raising GBP440 million.

Following the placing run by Merrill Lynch, which was first announced late Tuesday, Swiss Re has fully exited its holding in Phoenix Group.

In the FTSE 250, Savills was the best performer, up 6.0%, after the estate agent hailed an "extraordinarily" strong final trading period with the company's full year performance now forecast significantly ahead of expectations.

Savills highlighted particularly strong performances in the UK and Asia Pacific regions alongside improved performances in Continental Europe & the Middle East and North America; both of which have more than eliminated the losses of 2020.

The property expert said it now expects underlying pretax profit for 2021 to be very significantly ahead of the upper end of its previous range of expectations, though chose to keep its financial year 2022 guidance unchanged.

Dunelm was the second-best performer, up 5.5%, after the home furnishings retailer reported GBP407 million in total sales in the 13 weeks that ended December 25, its financial second quarter.

This was up 13% on a year ago and up 26% on two years ago. Digital sales represented 33% of this total, down from 41% a year ago, though up from 21% two years ago.

Dunelm said gross margin increased by 160 basis during the second quarter and 80 points during the first half, ahead of its expectations, amid higher full-price sales of seasonal ranges.

Gross margin for the full year is now seen down 30 to 50 basis points from financial 2021, an outcome that is better than expected. Dunelm said it expects first half pretax profit of GBP140 million, up from GBP112 million a year ago and GBP84 million two years before.

At the other end of the midcaps, Jupiter Fund Management was down 5.0% after JPMorgan downgraded the money manager to Neutral from Overweight.

Vistry Group was down 2.9%. The housebuilder said it expects to report a sharp rise in profit for 2021, fostering confidence for a significant step up in earnings and returns in 2022.

For the year, Vistry said it expects adjusted pretax profit to reach around GBP345 million, more than doubled from GBP143.9 million the year before.

For 2021, Vistry delivered a total of 6,551 home completions, a 41% rise from 4,652 in 2020, with an increase in affordable homes allowing the average selling price to edge upwards to GBP304,000 from GBP303,000.

Looking ahead, Vistry noted the letter from Housing Secretary Michael Gove on Monday that developers in the UK must agree a GBP4 billion plan to fix dangerous cladding on low-rise flats by early March or risk new laws forcing them to act.

"We fully agree that the costs of remediation should not be borne by leaseholders, and we will work directly with the government as well as with the Home Builders Federation to deliver a solution," the group stated.

Peers Taylor Wimpey, Barratt Developments, Berkeley and Persimmon were among the worst blue-chip performers, down 3.0%, 2.9%, 1.7% and 1.5% respectively.

"A 41% jump in completions, firm selling prices and growing confidence in its mixed-tenure Partnerships operation mean that housebuilder Vistry is reaping the benefit of strong demand for housing, Government support for the industry and 2020's GBP1.1 billion purchase of Galliford Try's housing and regeneration business," said AJ Bell Investment Director Russ Mould.

"However, the share price isn't interested, even if CEO Greg Fitzgerald and the board sanctioned the purchase of 7,641 new plots for future development, the highest figure at Vistry since the 'Great Financial Crisis'. A pause in house price growth is one explanation and the company's admission that the housebuilding industry, rather than leaseholders, should bear the cost of cladding remediation," Mould added.

On AIM, Fronter Developments was down 26% after the video game publisher swung to first half loss and lowered revenue guidance.

For six months to November 30, it swung to pretax loss GBP1.7 million from a profit of GBP6.5 million year before, on revenue of GBP49.1 million, up from GBP36.9 million.

Looking ahead, Frontier now expects financial 2022 revenue in range of GBP100 million to GBP120 million, down from GBP130 million to GBP150 million guided last September. Jefferies also downgraded the stock to Hold from Buy.

The pound was quoted at USD1.3637 at midday on Wednesday, up from USD1.3617 at the London equities close Tuesday.

The euro was priced at USD1.1364, higher against USD1.1327. Against the Japanese yen, the dollar was trading at JPY115.38, little changed from JPY115.37.

Brent oil was quoted at USD84.01 a barrel Wednesday at midday, rising from USD83.44 late Tuesday. Gold stood at USD1,816.10 an ounce, flat from USD1,816.01.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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