REPEAT: LONDON MARKET CLOSE: Stocks Edge Higher As UK Inflation Stays At Zero

LONDON (Alliance News) - London stock indices closed higher Tuesday, after drifting between gains and losses for most of the session, as UK consumer prices held just above the deflation line but remained at zero for the second straight month in March.

The FTSE 100 closed up 0.2% at 7,075.26, the FTSE 250 ended up 0.2% at 17,858.81, and AIM All-Share index up 0.4% at 741.80.

UK inflation remained at a record low of zero for the second straight month in March as declines in clothing and gas prices were offset by higher motor fuel costs. The inflation figure met economists' expectations. Month-on-month, the consumer price index gained 0.2%, also in line with economists' forecasts, but slower than a 0.3% rise in February.

At the same time, core inflation that excludes energy, food, alcoholic beverages and tobacco, eased to 1.0% in March from 1.2% in February. Economists expected the reading to show another 1.2% rise.

"The UK avoided deflation in March but the nation's stocks traded higher since the non-existent price growth leaves the Bank of England no choice but to keep interest rates where they are," said CMC Market analyst Jasper Lawler.

Investec analyst Philip Shaw noted that recent inflation readings have been as expected and will not alter the Bank of England's outlook.

"The CPI outturns over the past three months have been sufficiently close to the Monetary Policy Committee's projections in February's Inflation Report not to make a material difference to the interest rate outlook. Indeed what may be more interesting is the likelihood of a soft GDP reading for the first quarter, which looks as if it might register a quarterly rise of just +0.4%," Shaw said.

The pound fell against other major currencies following the inflation reading but gained ground against the dollar later in the day as the greenback declined on the back of weaker-than-expected US retail sales. At the close of European equity markets the pound traded at USD1.4785.

According to the Commerce Department, US retail sales climbed by 0.9% in March, less than the 1.1% growth forecast by economists. February sales were revised to a 0.5% decline.

"The latest results were disappointing, but fundamentals for consumer spending are favourable (good job growth, low interest rates) and measures of consumer attitudes are elevated. Thus, we look for individuals to become more active in the months ahead," said Michael Moran, chief economist at Daiwa Capital Markets.

The dollar further weakened after the International Monetary Fund revised down its US growth forecast to 3.1% for both this year and next, from its January forecast of 3.6% and 3.3% growth, respectively. Meanwhile, the fund estimated that lower energy prices, tame inflation and an improving housing market could counter the drag on exports from a strong dollar.

At the close of London stock markets, the DJIA was trading up 0.1%, the S&P 500 was flat and the Nasdaq Composite was down 0.4%.

In Europe, the French CAC 40 closed down 0.7%, and the German DAX 30 ended down 0.9%.

London-listed miners were the amongst the best-performing stocks, rebounding from falls on Monday caused by weaker-than-expected Chinese trade balance data and downgrades from Citigroup. In the FTSE 100, Anglo American ended up 4.1%, Rio Tinto up 2.8% and Glencore up 2.9%. The FTSE 350 mining sector index was the best performing sector index, up 3.0%.

Aberdeen Asset Management, down 2.5%, closed as the second-worst performer in the FTSE 100. Fears that hundreds of international fund managers could face unexpected tax bills in India have been heightened after Aberdeen, one of the largest investors in the country, became the first foreign institution to confirm it had received a demand for payment, the Financial Times reported.

Hargreaves Lansdown ended down 2.2% after the fund supermarket said that Executive Director and co-founder Peter Hargreaves has decided to step down from its board of directors. Hargreaves, who will remain employed by the group, founded the company with Stephen Lansdown in 1981 and saw it enter the FTSE 100 index 30 years later in 2011. He's decided it's the right time to leave the board and intends to spend more time with his family as well as pursuing outside interests.

Spire Healthcare Group was the worst-performing stock in the FTSE 250, down 9.2%, after private equity firm Cinven completed the sale of a 10% stake in the healthcare provider, raising a total of GBP136.4 million. Cinven sold 40.1 million shares in Spire at 340 pence per share, with JPMorgan Cazenove handling the disposal. Spire ended at 333.2599p.

Al Noor Hospitals Group, down 8.8% at 905.00p, was the next worst-performing midcap stock. Dubai-based private equity firm Ithmar Capital is understood to be planning to sell a 20% stake in Abu Dhabi-based Al Noor Hospitals Group, according to a report. Global Capital magazine said Deutsche Bank has been hired to place around 23.4 million shares in Al Noor for 925 pence per share, raising GBP216 million for Ithmar, which is selling the stake via its Astro II special purpose vehicle.

Tullow Oil ended up 8.6% after Citigroup upgraded it to Buy from Neutral.

Connemara Mining Company shares more than doubled, making it the best-performing stock in the AIM All-Share index, after it said it has been awarded five new prospecting licences in the Innisowen peninsula in County Donegal in Ireland. The area, which includes the former Glentougher lead silver mine, is considered by the company's geologists to be prospective for high-grade gold mineralisation and has potential for some base metal deposits.

In the economic calendar Wednesday, there is Chinese GDP and industrial production data at 0300 BST and Japanese industrial production at 0530 BST. German consumer prices is at 0700 BST, French consumer prices is at 0745 BST, before the European Central Bank's interest rate decision at 1245 BST and subsequent press conference at 1330 BST. Later in the day there is US industrial production data at 1415 BST and EIA crude oil stocks at 1530 BST.

In the corporate calendar, there is a fourth quarter trading statement from luxury fashion retailer Burberry Group, and full-year results from JD Sports Fashion. There is also an interim management statement from oil services company Hunting, and from LED technology supplier Dialight, and a trading update from Jupiter Fund Management. First quarter production results are also expected from precious metals miner Fresnillo.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1