LONDON MARKET MIDDAY: Stocks rise despite UK inflation at 30-year high

(Alliance News) - London stocks climbed into the green as Wednesday's session progressed, with investors untroubled by UK inflation accelerating to its highest rate in nearly 30 years.

Helping the blue-chip FTSE 100 index tip into positive territory were gains for publisher Pearson, luxury firm Burberry, and UK housebuilders.

The FTSE 100 was up 23.14 points, or 0.3%, at 7,586.69 midday Wednesday. The mid-cap FTSE 250 index was up 63.98 points, or 0.3%, at 22,716.69. The AIM All-Share index was down just 0.18 of a point at 1,154.02.

The Cboe UK 100 index was up 0.2% at 753.30. The Cboe 250 was up 0.4% at 20,379.84, and the Cboe Small Companies flat at 15,834.24.

In mainland Europe, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.2% on Wednesday.

The FTSE 100 managed to shake off a poor performance overnight by US and Asian equities, aided by share price gains for Pearson and Burberry.

Pearson topped the blue-chip index, rising 6.9%, on a better-than-expected profit outturn for 2021.

The London-based educational publisher expects to report an annual adjusted operating profit of around GBP385 million, 2.7% higher than consensus at GBP375 million. This marks a 23% increase year-on-year from an GBP313 million.

Pearson's total underlying sales were up 8% year-on-year, with weaker growth in the final quarter of 1%.

Luxury fashion house Burberry rose 5.9% after saying sales improved in the lead-up to Christmas and it expects to see a softer foreign exchange hit to annual results.

Burberry, famed for its trench coats and check print, said retail revenue in the 13 weeks to December 25 - the company's financial third quarter - rose 5.1% annually to GBP723 million from GBP688 million.

It now expects just a GBP79 million currency hit to annual revenue, having previously forecast GBP100 million. Adjusted operating profit will take a GBP27 million hit, with Burberry lowering its forecast from GBP40 million.

The mood in New York appears to have turned brighter after Tuesday's rout, with the Dow Jones called up 0.2%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.3%. The market measures had closed down 1.5%, 1.8% and 2.6%, respectively, on Tuesday.

Wednesday's improved sentiment comes despite price pressures persisting around the globe.

UK inflation soared to a near 30-year high in December, focusing more market attention on the Bank of England's meeting at the start of next month. The consumer price index rose 5.4% year-on-year in December, accelerating from 5.1% in November. This topped market forecasts of 5.2%.

"This is the highest CPI 12-month inflation rate in the national statistic data series, which began in January 1997, and it was last higher in the historical modelled data series in March 1992, when it stood at 7.1%," the Office for National Statistics said.

Pushing up the index were prices for second-hand cars, as well as for food and clothing. Encouragingly, while prices of fuels & lubricants grew a heady 27% in December, this was slowed from 29% in November, and electricity price growth was steady at 19%.

But oil prices remained elevated on Wednesday, trading around their highest level since 2014. North Sea benchmark Brent oil was trading at USD88.26 a barrel at midday, higher than USD87.22 late Tuesday.

Sterling was quoted at USD1.3643 following the inflation data, above USD1.3583 at the London equities close on Tuesday.

Similarly, data confirmed Germany's annual inflation rate at 5.3% in December, ticking up from November's inflation rate of 5.2%. On a harmonised basis, calculated for comparative purposes across the EU, prices grew 5.7% year-on-year, confirming the initial figure.

December's statistics mean the average annual inflation rate in Germany throughout 2021 was 3.1%, the highest since 1993's 4.5%. In 2020, this had been just 0.5%.

And in Ireland, inflation accelerated in December and for 2021 as a whole. On an annual basis, the consumer price index rose 5.5% in December, compared to a 5.3% rise in November. For 2021, the annual average rate of inflation was 2.4%, compared to a 0.3% fall in 2020 and a 0.9% increase in 2019.

The euro firmed to USD1.1344 on Wednesday from USD1.1335 late Tuesday.

Amid broader dollar weakness, the yen and gold advanced. Against the yen, the dollar fell to JPY114.43 versus JPY114.61.

Gold was quoted at USD1,819.23 an ounce on Wednesday, higher than USD1,812.88 on Tuesday. This boosted precious metals miner Polymetal International, up 4.5% at midday, and peer Fresnillo rose 1.6%.

Elsewhere in London's FTSE 100 index, housebuilders such as Persimmon and Berkeley Group rose following data that showed UK house prices grew 10% on a year earlier in November. Persimmon was up 1.9% at midday and Berkeley up 1.2%.

The average UK house price was GBP271,000 in November. That was GBP25,000 higher than a year before and just below the record level of GBP272,000 notched in September, at the end of which the stamp duty holiday was halted.

WH Smith topped the FTSE 250 index. The books and stationery retailer reported good progress towards recovery on pre-pandemic times in the first half of its financial year to date, despite a "small impact" from the Omicron variant.

The Swindon, England-headquartered high street and travel outlet retailer said that total revenue in the 20 weeks leading up to January 15 was 85% of the same period in the 2019 financial year. November was the strongest month during this period, bringing in 90% of 2019's revenue.

Wh Smith shares were up 6.5% at midday.

Watches of Switzerland shares rose 4.6% on a positive read-across from Swiss luxury goods firm Richemont, up 7.6% in Zurich.

Cartier-owner Richemont said sales surged 35% to EUR5.66 billion in the financial third quarter that ended December 31 from EUR4.19 billion in the prior year. This was driven by double-digit increases in all regions, channels and business areas, thanks to a relatively supportive economic environment.

JD Wetherspoon rose 4.5% despite guiding to a half-year loss. The Watford, England-based pub chain saw like-for-like sales decrease by 12% and total sales drop by 13% in the 25 weeks leading up to January 16, compared to the same period in financial 2020.

Wetherspoon said its second-quarter ending January 16 was damaged by the 'Plan B' Covid restrictions brought in by the UK government in December. But while it expects to be loss-making in the first half, it is hoping for a stronger end to the financial year as restrictions ease and consumer confidence improves.

UK Prime Minister Boris Johnson is expected to announce to Parliament on Wednesday that the Plan B measures will be lifted next week.

Liontrust Asset Management fell 3.4%. The firm said its assets under management surged in the third quarter, though have since ebbed at the start of the fourth quarter.

Assets under management and advice amounted to GBP37.24 billion at December 31, up 4.4% quarter-on-quarter to GBP35.66 billion. However, assets under management and advice stood at GBP36.04 billion on January 14, down 3.2% from December 31.

Amongst the small-caps, Devro shares rose 3.3%. The sausage casings maker expects operating profit to be in line with expectations for 2021, but earnings per share are expected to come in "modestly" ahead of estimates of 16.9 pence, owing to a one-off tax benefit as a result of a change to the UK corporate tax rate.

By Lucy Heming; lucyheming@alliancenews.com

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