LONDON (Alliance News) - UK stocks are trading mixed Tuesday, with the the FTSE 100 being held back by some if its biggest constituents for the second consecutive day, while the the pound has jumped to a four-day high against the dollar after UK inflation data showed prices rising faster than expected.
By mid-morning Tuesday the FTSE 100 is down 0.5% at 6,813.30, the FTSE 250 is up 0.5% at 15,457.03, and the AIM All-share is down 0.1% at 790.39.
Major European markets are broadly lower, with the French CAC 40 down 0.4%, and the German DAX down 0.3%.
UK CPI came in at 1.8% year-on-year in April, up from the four-and-a-half low of 1.6% that it dipped to in March, and exceeding economists expectations for a growth rate of 1.7%. On a monthly basis, prices rose at 0.4% in April, slightly faster than the 0.3% expected.
Last month, the dip in CPI to 1.6% put it just behind the most recent wage growth rate, including bonuses, of 1.7%, which was met with a lot of positivity as it suggested the return of real wage growth to the UK economy. However, this latest up-tick in inflation erodes any such wage growth.
"This wasn't entirely unexpected, and the expectation is that it is likely to be a temporary blip, given that factory gate prices continue to remain weak, which should keep prices throughout the supply chain on the low side," said CMC Markets chief market analyst Michael Hewson.
UFXMarkets managing director Dennis de Jong said, "we still expect it to remain below the Bank of England?s 2% target for some time, reducing pressure in the short term to raise interest rates."
The latest house price data, released from the Office for National Statistics along with the inflation numbers may also reduce pressure on the central bank. The Department for Communities and Local Government house price index rose by 8.0% year-on-year in April, slowing from 9.1% in March and coming in considerably behind the 10.7% growth that had been predicted.
While the Bank of England governor has been explicit that house prices are a matter for the Prudential Regulation Authority rather than the Monetary Policy Committee, he has also said that their rapid acceleration poses the single greatest threat to the UK economic recovery, and the minutes of the latest MPC meeting will therefore be watched very carefully on their release Wednesday for clues as to any shift in policy from wither the MPC of the PRA.
The pound rallied to a weekly high against the dollar at the time of the print, peaking at USD1.6865 before softening a little to continue to trade up just slightly over the session at USD1.6830.
Within the UK equity movers, Vodafone is providing a significant drag on the blue chip index, trading down 4.4% and leading the sector fallers, after reporting disappointing full year results. The group reported a 1.9% drop in revenue to GBP43.6 billion, and a 7.4% drop in pretax earnings to GBP12.8 billion, as well as booking impairment charges of GBP6.6 billion, covering various countries.
Marks & Spencer is also seeing its shares fall Tuesday, currently down 3.2% after reporting a drop in underlying profit for the third consecutive year as it continued to struggle to retain market share from competitors such as Next. The high street chain reported underlying profit of GBP623 million, slightly ahead of the consensus expectation of up to GBP620 million, but also remained cautious on the outlook due to competition and promotional pricing in the UK retail sector.
"The results for financial year to March came in slightly ahead of revised expectations, but having reached the end of a three year transformation plan the focus should now be very much on future delivery," said Edison Investment Research analyst Victoria Buxton.
AstraZeneca is down another 1.2% after plummeting more than 10% on Monday when it rejected Pfizer' final takeover offer. Pfizer has said Tuesday that it would only increase its offer if its own share price improved, or if another suitor emerged with a better offer. Otherwise, under takeover rules, Pfizer will have to walk away for a minimum of six months after May 26.
At the other end of the FTSE 100, Carnival is leading the gainers, up 3.9% after saying that it would add two ships to its Australian fleet in 2015 to meet surging demand for cruises in the country, where passenger numbers have more than doubled in the last five years.
In the FTSE 250, Greencore leads the index higher, up 8.1% after raising its interim dividend by 15.8%. Investec upgraded the stock to Buy from Add on the back of the first half numbers, where it says profit was driven by good revenue advances in Food to Go in both the UK and US.
Homeserve is another FTSE 250 company helping the index outperform. Announcing full-year pretax profit of GBP84.1 million and earnings per share of 18.2p, the results were in line with expectations, but management have also indicated that they will review the capital structure, which may result in an increased dividend, special dividend or share buy-back, says Liberum Capital analyst Joe Brent.
Afren is doing less well within the FTSE 250, down 4.8% and leading the fallers. The oil and gas exploration and production company reported a drop in profits to USD55.8 million for the first quarter from GBP138.8 million a year earlier, as revenue fell by 30%.
The UK CPI was the main data release of the day, leaving little in the calendar to shift sentiment one way of the other, apart from some central bank speakers much later in the session. US Philadelphia Fed president Charles Plosser speaks at 1630 GMT, and New York Fed President William Dudley speaks at 1700 GMT.
Ahead of the release of the latest MPC meeting minutes on Wednesday, committee member Charlie Bean speaks at 1730 GMT.
US futures trading currently indicates that stocks on Wall Street will follow Europe by opening a touch softer.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Astrazeneca (AZN)
Marks & Spencer (MKS)
Carnival (CCL)
Vodafone (VOD)
Greencore (GNC)