Stocks were on the rise on Tuesday morning as government bond yields pulled back from recent gains and industrial metals prices slipped.
Gains in the FTSE 100 accelerated mid-morning after data showed inflation unexpectedly slipped in October, taking the British pound lower in a boost to multinational shares. Supermarkets, telecoms and airlines were in focus in an array of earnings reports.
Sterling dropped on the surprise fall in consumer price inflation. But the story of higher prices to come has been given extra credence by a huge 12.2% y/y rise in input costs. This will inevitably be passed through to consumers in coming months. Still, this data is proof that there are still some strong downward forces on prices, notably on clothing and tuition fees. The 15% drop in the pound is inflationary, but it will take time to make its way through the supply chain. Should data later this week show wages are stable, the outlook in the medium term for the UK economy should be robust.
The protracted price war is starting to reap some rewards for British supermarkets at the expense of German rivals. A readjustment of growth rates in favour of the Big Four supermarkets and away from the discounters sent Morrison (LON:MRW) and Tesco (LON:TSCO) to the top of the FTSE 100. Deflation in supermarket prices is still present, but continues to ease. Kantar noted: “It's worth remembering that deflation has been easing since December last year, well before the (June) referendum."
Shares of EasyJet (LON:EZJ) were up over 2.5% by mid-morning in London after a steep fall in profits came in near the upper end of its forecast range. Investors have been encouraged by Chief Executive Carol McCall getting ahead of Brexit negotiations with plans for a second registration in Europe.
Shares of British American Tobacco (LON:BATS) edged higher despite reports its offer to buy out the rest of US tobacco firm Reynolds had been rejected. Vodafone (LON:VOD) shares jumped in early trading after it beat earnings forecasts for the third quarter.
Stocks in the US look set for a higher open with the Dow Jones eyeing its seventh day of gains, this time in line with higher oil prices.
Shares of Facebook (NASDAQ:FB) remain under considerable pressure; not only because of a broader tech-selloff but because of the rising risk that is “fake news” scandal starts to put off advertisers. The social network’s shares are down over 12% this month. Facebook is caught between a rock and a hard place (or a block and like place?). If it allows “fake news,” the quality of its content is lowered, if it tries to prevent it, it risks censoring the freedom of expression behind its appeal.
USA pre-opening levels
S&P 500: 3 points higher at 2,167
Dow Jones: 23 points higher at 18,891
Nasdaq 100: 7 points higher at 4,709
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