LONDON MARKET OPEN: FTSE 100 steady despite UK inflation intensifying

(Alliance News) - The FTSE 100 was only slightly lower in early trade on Wednesday despite a dire finish in New York, with gains for Pearson and Burberry helping to keep the London stock index in touching distance of green.

The FTSE 100 was down just 3.51 points at 7,560.04 early Wednesday. The mid-cap FTSE 250 index was down 32.02 points, or 0.1%, at 22,620.69. The AIM All-Share index was down 0.63 points, or 0.1%, at 1,153.57.

The Cboe UK 100 index was down 0.2% at 750.32. The Cboe 250 was up 0.1% at 20,322.71, and the Cboe Small Companies down 0.1% at 15,819.05.

In mainland Europe, the CAC 40 in Paris was up 0.1% while the DAX 40 in Frankfurt was down 0.4% early Wednesday.

"Over the last few days, the main factor influencing stock markets has been treasury yields, which have been climbing higher due to anticipations that the Fed may become more hawkish regarding the upcoming interest rate hikes," said Naeem Aslam, chief market analyst at AvaTrade.

This caused stocks in New York to stumble on return from a long weekend, with the Dow Jones Industrial Average ending own 1.5%, the S&P 500 down 1.8%, and the Nasdaq Composite down 2.6% on Tuesday.

Unlikely to ease worries about hawkish central banks were reports on Wednesday showing UK and German inflation hitting levels last seen in the 1990s.

The UK consumer price index rose 5.4% year-on-year in December, accelerating from 5.1% in November. This topped market forecasts of 5.2% and was a 30-year high.

"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.

In Germany, inflation was confirmed accelerating to 5.3% in December on an annual basis. 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%.

Sterling was quoted at USD1.3592 following the data, off its morning peak but still above USD1.3583 at the London equities close on Tuesday.

The euro softened to USD1.13331 early Wednesday from USD1.1335 late Tuesday.

Against the yen, the dollar fell to JPY114.36 versus JPY114.61.

In Asia on Wednesday, the Japanese Nikkei 225 index slumped 2.8%. In China, the Shanghai Composite ended down 0.3%, while the Hang Seng index in Hong Kong closed up 0.1%. The S&P/ASX 200 in Sydney lost 1.0%.

Gold was quoted at USD1,813.22 an ounce early Wednesday, higher than USD1,812.88 on Tuesday. Brent oil was trading at USD87.97 a barrel, higher than USD87.22 late Tuesday.

London's oil majors posted modest gains on the continued strength of crude prices. BP shares were up 0.4%, while Royal Dutch Shell 'A' and 'B' shares were up 0.3% and 0.4%, respectively.

At the top of the FTSE 100 was educational materials publisher Pearson. The stock rose 5.2% after Pearson reported "great progress" in the fourth quarter, leading to a better-than-expected full-year outturn.

Full-year sales were up 8%, and Pearson expects adjusted operating profit of GBP385 million, up 33% on the year before and ahead of consensus at GBP375 million.

"Led by a strong management team, we are repositioning the business, driving digital innovation and an increased focus on the consumer through the launch of Pearson+. We are well placed to build on this momentum in the year ahead and look to the future with confidence," said Chief Executive Andy Bird.

Burberry was up 4.5% as luxury goods retailer reported third-quarter sales growth and said it sees a softer-than-anticipated currency headwind for the full year.

Retail revenue amounted to GBP723 million in the 13 weeks to December 25, up 5% from GBP688 million a year prior. Full-price comparable store sales rose 15% year-on-year, with all comparable store sales up 7%.

On two years prior, being before the impact of the pandemic, full-price comparable store sales were up 26%, but all comparable store sales were down 3%.

Looking out, Burberry expects full-year adjusted operating profit to grow in the region of 35% at constant exchange rates. In addition, the currency headwind is now expected to be GBP79 million on revenue, down from around GBP100 million, and GBP27 million on adjusted operating profit, down from GBP40 million.

In another positive retail update, shares in WH Smith rose 4.4% after reporting sales in the 20 weeks to January 15 were 85% of pre-virus levels. This reached as high at 90% in November, before the onset of the Omicron variant, and waned only a touch to 87% in December.

"Looking ahead, although we are seeing a small impact from the Omicron variant, we anticipate a resumption in the recovery of our Travel markets over the coming months. We are well placed for the key trading period in Travel this summer and the ongoing recovery in our markets," said Chief Executive Carl Cowling.

Other retailers, such as Kingfisher and JD Sports, were up 2.2% and 2.0% respectively in a positive read-across for the sector.

By Lucy Heming; lucyheming@alliancenews.com

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