LONDON MARKET OPEN: Stocks up on tamer than forecast UK inflation data

(Alliance News) - London's FTSE 100 opened higher on Wednesday, with a favourable UK inflation reading given equities a much-needed shot in the arm, after a tough start to the year was exacerbated by a red-hot US consumer price index report on Tuesday.

The FTSE 100 index opened 37.64 points higher, 0.5%, at 7,549.92. London's flagship index is down around 2.3% so far this year, however.

The FTSE 250 was up 74.47 points, 0.4%, at 18,998.30, and the AIM All-Share was down 0.51 of a point, 0.1%, at 746.73.

The Cboe UK 100 was up 0.6% at 754.99, the Cboe UK 250 was rose 0.5% to 16,424.52, and the Cboe Small Companies was flat at 14,366.92.

The pound was quoted at USD1.2547 early Wednesday, declining from USD1.2596 late Tuesday. Sterling traded around a session low in the wake of the UK data. It had bought as much as USD1.2610 earlier on Wednesday, however.

The UK's annual inflation rate was steady last month, defying expectations of an acceleration, numbers showed.

According to the Office for National Statistics, the rate of annual consumer price inflation was unmoved at 4.0% in January, where it had stood in December.

It had been expected to pick up to 4.2%, according to FXStreet cited consensus.

Consumer prices declined 0.6% in January from December. They had been expected to decline at a lesser monthly pace of 0.3%, according to FXStreet. Prices had risen 0.4% in December from November.

The UK annual inflation rare hit a recent peak of 11.1% in October 2022, and faded to as low as 3.9% in November of last year. The Bank of England has a 2% inflation target, with the current rate still double that.

The next Bank of England decision is on March 21. There will be another consumer price index reading a day prior to that decision for Threadneedle Street to digest.

BoE Governor Andrew Bailey speaks at 1500 GMT on Wednesday.

Analysts at Lloyds Bank commented: "He may take the opportunity again to say that any recession is likely to be shallow and that policymakers attach more weight to more positive forward-looking indicators of growth."

Equities in New York suffered overnight. Both the Dow Jones Industrial Average and S&P 500 shed 1.4%. The Nasdaq Composite plunged 1.8%.

In Tokyo, the Nikkei 225 fell 0.7% on Wednesday. Sydney's S&P/ASX 200 lost 0.7%. The Hang Seng shot up 0.8% as traders returned to desks in Hong Kong. Financial markets in Shanghai stay closed for the Chinese New Year holiday.

Swissquote analyst Ipek Ozkardeskaya commented: "Yesterday's inflation data from the US didn't go smoothly down the market's throat. Instead, the stronger-than-expected set of inflation data dashed hopes of seeing the Federal Reserve cut rates anytime in the first half of this year.

The analyst continued: "Markets now see the first Fed cut happen in June, with around 75% chance. That's such a wild ride in market expectations; we began this year pricing an 80% chance for a March rate cut, and we came all the way to pricing a 75% chance for a June rate cut."

According to the Bureau of Labor Statistics, the nation's consumer price inflation rate eased to 3.1% in January, from 3.4% in December. It had been expected to ebb to 2.9%, according to FXStreet cited consensus, so the latest reading topped expectations.

Annual core inflation, so excluding food and energy, was steady at 3.9% in January, defying expectations of a slowdown to 3.7%.

Commerzbank analyst Ulrich Leuchtmann said "one swallow does not make inflation", however.

"Without making any assumptions about inflation dynamics, yesterday's figure does not indicate a new acceleration in inflation dynamics, but merely a stagnation in the disinflation process," the analyst explained.

The euro stood at USD1.0701 early Wednesday, down against USD1.0716 on Tuesday. Against the yen, the dollar was trading at JPY150.49, down from JPY150.66.

In Paris, the CAC 40 was up 0.1%. Frankfurt's DAX 40 was flat.

In London, Coca-Cola HBC shares shot up 4.8% as it beat on annual organic growth.

The soft drink bottling firm, which operates in nations including Cyprus, Greece and Italy, said net sales revenue surged 11% in 2023 to EUR10.18 billion, from EUR9.20 billion in 2022. Net sales fell shy of the Vuma cited consensus of EUR10.25 billion.

Pretax profit shot up 46% to EUR910.3 million from EUR623.6 million, but was shy of consensus of EUR976.3 million.

Organic revenue in 2023 jumped 17%, ahead of consensus of a 16% surge, however.

Coca-Cola HBC proposed an ordinary 2023 dividend of EUR0.93 per share, up 19% from 2022. It had launched a EUR400 million two-year share buyback programme in November.

For 2024, it targets organic revenue growth in its 6% to 7% medium-term target range.

Severn Trent added 1.3% and United Utilities rose 0.5%, though they offered somewhat contrasting performance outlooks.

Severn Trent said it has weathered recent UK storms and is continuing to guide for at least GBP50 million in outcome delivery incentives this year.

ODIs provide water utilities with rewards should they meet in line with "stretching performance targets", Severn Trent explained. They can be penalised if their performance is below target, however.

Severn Trent said achieving this would take its total cumulative rewards across the first four years of the asset management plan regulatory period, which spans 2020 to 2025, to over GBP250 million.

United Utilities backed annual guidance and said it has traded strongly since it released half-year results in November.

The firm, which also concludes its financial year at the end of next month, said heavy rainfall has hurt its ODI performance by around GBP25 million, however.

"Since the start of 2023, there have been 14 named storms, of which 9 have occurred since the end of September," United Utilities explained. "Net ODI outperformance is expected to be around GBP40 million for 2023/24."

Bloomsbury Publishing shares rose 7.5%. It expects annual results to be "significantly ahead of upgraded market expectations".

The publisher noted that consensus for the year ending February 29 stands at GBP291.4 million for revenue, and GBP37.2 million for pretax profit before "highlighted items". It would represent growth of 10% for revenue and 20% for profit.

"I am overjoyed to report an exceptionally strong period of trading, principally driven by the increasing demand for fantasy fiction," Chief Executive Nigel Newton said.

Shares in TheWorks surged 7.9%. Acquisition vehicle Kelso Group Holdings said its own chief executive and chief financial officer have been appointed to the board of the arts and crafts retailer.

John Goold, Kelso's CEO and Mark Kirkland, its CFO, join TheWorks as non-executives. Kelso has a 5.1% stake in the TheWorks.

Kelso added: "John and Mark will become members of the board but, as non-independent directors, will not join any committees. Their focus will be on all matters relating to shareholder value. The Works has consulted with certain of its major shareholders, who are supportive of these appointments."

In addition, a regulatory filing showed Matthew Moulding, founder and chief executive of e-commerce firm THG, has raised his stake in Kelso to 8.5% from 7.0%. Kelso owns a 0.6% THG stake.

Kelso traded 2.3% higher, while THG was up 1.8%.

Still to come on Wednesday is a eurozone gross domestic product reading at 1000 GMT.

By Eric Cunha, Alliance News news editor

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