• London advances on better than expected US data
• US CPI up 8.5% in July, below forecast
• Hopes that US inflation may have peaked
Shares in London pushed ahead after better than expected US CPI data gave hope that US inflation may have peaked.
The reading for July came in at 8.5%, lower than the consensus forecast of 8.7%, and below last month’s 9.1% rise.
At 1.45pm the FTSE 100 was at session highs, up 27.02 points at 7,515.17 while the FTSE 250 advanced 176.34 points to 20,088.74.
John Leiper, chief investment officer at Titan Asset Management said: ““There are growing signs that inflation may have started to peak.”
“Forward-looking indicators, such as breakeven rates and inflation swaps are pointing towards 2% inflation in one-to-two years’ time.”
“Commodity prices have fallen, as a result of the slowdown in global growth, and the recent collapse in US housing demand should feed through to house prices and rental inflation which, as a structural driver of core inflation, has been a lingering concern for some time.”
“Money growth has slowed substantially and wage growth is also slowing with real wages falling globally.”
“Looking at the Dallas Fed survey, as a potential indicator, there is a real possibility that inflation peaks this year before falling to more reasonable levels.”
He did caution “we shouldn’t read too much into just one print and a decline in the headline number is to be expected given how far energy prices have fallen over the last month.”
“The real focus is on underlying inflation and that’s where things get interesting.”
“Core inflation in July also came in below expectations at 0.3% versus 0.5% consensus and 0.7% prior.”
“The US dollar is selling off on the news with bond yields falling across the curve and US equity futures soaring.”
12.40pm: Consumer confidence on the rise in July - YouGov (LON:YOU)
Consumer confidence rose in July, possibly due to the UK government's cost-of-living payments, according to a YouGov survey, a rare beacon of light in amongst the gloomy scenarios being painted as the cost of living squeeze intensifies.
The two-point rise in the overall index from YouGov and the Centre for Economics & Business Research (CEBR) brings an end to a seven-month stretch of decline that began in December 2021.
Much of the index's improvement can be explained by an uptick in household finance measures, coinciding with July seeing the arrival of the first government cost-of-living payments for low-income households.
Despite the boost, the overall public mood around household finances remains downbeat – with the survey taken before the Bank of England announced that inflation was expected to hit 13% this year.
Business activity also saw improvements, with employees slightly more likely to report that their workplaces are busier than they were last month and more likely to expect them to get busier in future.
Perceptions of job security among UK workers also inched up.
The only measure to see a decline was the retrospective home value measure, which deteriorated by 0.5 points. However, homeowners are more optimistic than they were before after three months of worsening outlook.
Kay Neufeld, head of forecasting at CEBR, said: ‘The first increase in the consumer confidence index since November 2021 provides a welcome reprieve after a torrid string of declines saw sentiment plummet by more than nine points over the past seven months.
‘Noticeably, the strongest upward momentum in July came from the backward and forward-looking household finance indicators.
Emma McInnes, global head of financial services at YouGov, said: ‘While this increase in consumer confidence is undoubtedly positive news, there is a long road back to regain ground lost over the past seven months of decline.”
11.55am: London holds narrow gains
FTSE 100 held onto narrow gains late morning boosted by gains in the UK insurance sector, following results from Aviva (LON:AV) and Admiral, and hopes for a positive restart on Wall Street.
At 11.55am the blue chip index was 8.56 points higher at 7,496.71.
All that could change with the pivotal US inflation data for July due today which is expected to remain close to four-decade highs.
The question of whether inflation has reached its peak remains unanswered and a forecast-beating headline CPI figure could well stoke expectations of further interest rate increases and weigh on stocks, while a softer reading will likely drive stocks higher.
Futures for the Dow Jones Industrial Average were trading 0.2% higher pre-market, while those for the broader S&P 500 index were also up 0.2%, and contracts for the tech-laden Nasdaq-100 added 0.3%.
“Today is probably the most important day of the week in terms of economic data, as the US will reveal its latest CPI data, and investors have high expectations of seeing a softer figure in July,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In energy markets, oil prices were lower, indicating that energy-led inflation may be easing. WTI crude futures were down 0.92% at $89.67 a barrel, while Brent crude futures were down 0.92% at $95.42.
“Good news was that the US oil inventories rose by more than 2 million barrels last week, versus a decline around 400,000 barrels expected by analysts,” noted Ozkardeskaya. “Oil bulls are also quiet this week, as US and Iran could finally reach a nuclear agreement, which would then unlock the Iranian oil and give a certain relief to the tight-supply market.”
11.20am: London nudges into positive territory
hares in London pushed narrowly into positive territory late morning lifted by positive results from insurers, Admiral and Aviva, although caution was in the air ahead of the US CPI inflaion report.
By 11.20am the FTSE was trading up 1.79 at 7,489.94 with the FTSE 250 71.53 points higher at 19,983.86.
4imprint Group Plc (AQSE:FOUR) was a standout performer in the FTSE 250 with shares up nearly 15% after impressive first half numbers.
The promotional products group reported a 58% increase in sales to $515.54mln, a 1,122% rise in operating profits to $43.98mln while net cash improved from $42mln to $67mln.
finnCap analyst Guy Hewett described the results as “very strong” and has raised his full year 2022 forecast for earnings per share by 8% and the price target for the group from 4,913p to 5,216p.
10.00am: FTSE off lows supported by gains in insurance stocks
FTSE 100 pushed back close to opening levels supported by positive results from insurance groups, Aviva PLC (LSE:AV.) and Admiral Group Plc (LON:ADML) (LSE:ADM) although the mood remained cautious ahead of the US CPI report.
Danni Hewson, financial analyst at AJ Bell said “All eyes will be on US inflation data released later today as this could have a major influence on the direction of the stock market. A higher than expected figure could weigh on equities as investors have simply had enough of the rising cost of living.”
At 10.00am the blue chip index was trading 0.94 points higher at 7,488.29 and the FTSE 250 was 66.61 points to the good at 19,979.01.
Shares in Deliveroo rose 2.7% to 94.12p despite reporting higher losses of £298mln from £213mln in the six months to June 30th which were slightly better than forecast.
Michael Hewson Chief Market Analyst at CMC Markets UK said: “Trying to pick the bottom in the Deliveroo share price has proved to be a thankless task over the last 12 months” but added “there is some evidence that they might be near a base.”
He said “Deliveroo has made great strides in recent months in signing deals with Amazon (NASDAQ:AMZN) and Waitrose, helping to push gross transaction value in quarter one up to £1.79bn, a rise of 11% from the same period a year before.”
9.00am: Weak start in London
Blue chip stocks were slightly lower in early trading in London on Wednesday as investors digested a hefty batch of corporate news and looked ahead to key US CPI inflation data later today.
By 9.00am the FTSE was down 8.98 points at 7,479.17 with the broader FTSE 250 slipping 60.72 points to 19,851.68.
US CPI numbers will provide the focus later in the session with Ipek Ozkardeskaya, senior analyst at Swissquote Bank saying “Today is probably the most important day of the week in terms of economic data, as the US will reveal its latest CPI data, and investors have high expectations of seeing a softer figure in July. “
“The US CPI data is expected to have slowed to 8.7% in July, from 9.1% printed a month earlier.”
“The recent downside correction in energy and commodity prices, the sharp fall in inflation expectations, as released by the NY Fed yesterday, and deflation in online goods prices point that we may see some relief on consumer prices of last month.”
But “rising wages, and high rents remain factors that could keep inflation sticky at high levels“ Ozkardeskaya added.
“A CPI figure in line with expectations, or ideally softer will certainly temper the hawkish Federal Reserve expectations, pull US yields lower and trigger a relief rally across stock markets."
"We could then see the S&P500 make another attempt on the critical 4200 resistance.”
In London, results from insurance groups, Aviva PLC (LSE:AV.) (up 5.72%), Admiral Group Plc (LSE:ADM) (up 3.63%) and Prudential PLC (LSE:LON:PRU) (down 1%) received mixed reviews.
Aviva reported a 14% increase in operating profit to £829mln in the six months to June in what group chief executive officer, Amanda Blanc, described as “an excellent six months.”
Keith Bowman, Investment Analyst at interactive investor said: “costs are being tackled, while shareholder returns are now buoyed by the prospect of a future share buyback programme, adding to a dividend yield of over 7%.”
“On balance, and with group finances strengthened and greater efficiency still being achieved, analyst consensus opinion points towards a buy”.
Although Admiral reported a fall in pre-tax profits to £251mln, this was still better than expected, against tough comparisons flattered by the low claims during the pandemic.
The insurer also announced returns to shareholders with a special dividend of 15.8p to be paid alongside an interim payout of 44.2p.
A further special dividend of 45p has also been declared reflecting the final payment of the phased return to shareholders of the proceeds from the sale of the Penguin Portals.
Royal Mail PLC (LSE:LON:RMG) fell 2.55% to 259.60p after it warned that the proposed strike action by members of the Communication Workers Union would send the group into the red for full year 2022-23.
Four days of sttrike action are planned by the CWU in August and September.
Peel Hunt now forecasts a £55mln full year 2023 operating loss in the UK, compared to guidance of break even at quarter one.
8.30am: Markets in London open lower
FTSE 100 opened slightly lower on Wednesday as investors nervously awaited today’s US CPI inflation report.
By 8.15am the blue chip index was trading down 11.11 points at 7,478.67 and the FTSE 250 was 9.99 points lower at 19,902.41.
Insurers Admiral Group Plc (LSE:ADM) (up 6.38%) and Aviva PLC (LSE:AV.) (up 3.1%) led the FTSE 100 risers after both groups reported half year results.
Aviva reported a 14% increase in operating profit to £829mln in the six months to June in what group chief executive officer, Amanda Blanc, described as “an excellent six months.”
The group also announced plans for a share buy back with Blanc commenting: “We are increasingly confident in Aviva's prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full year results." Blanc said.
The company said the size of any buy back would be determined at the year end, the group said.
Admiral also announced returns to shareholders with a special dividend of 15.8p to be paid alongside an interim payout of 44.2p.
A further special dividend of 45p has also been declared reflecting the final payment of the phased return to shareholders of the proceeds from the sale of the Penguin Portals.
The insurance group did however report a sharp fall in operating profits to £257.2mln from £488.1mln in the six months to June with UK Insurance profits of £322mln, 41% lower than 2021 with higher current period claims and lower reserve releases and profit commission.
But Prudential saw its shares slip 1.90% to 970.40p after Mark FitzPatrick, group chief executive, said: “Although there are signs that Covid-19-related impacts in many of our markets are stabilising, over the remainder of the year we expect that operating conditions may continue to be challenging.”
7.35am: London seen opening lower
Shares in London are expected to open on the downside following losses in Asia and the US overnight and with caution ahead of today’s US CPI inflation report.
Spread betting companies are calling the FTSE 100 down around 22 points.
Michael Hewson Chief Market Analyst at CMC Markets UK commented: “US markets came under pressure as weakness in tech acted as a wider drag after another earnings downgrade, this time from Micron (NASDAQ:MU), following on from Nvidia on Monday.”
“This weakness looks set to translate into a cautious European open as investors look for evidence that inflation is starting to show signs of topping out.”
“Today’s main focus revolves around the question as to whether we are near peak US CPI, as markets gear up for the potential for a significant move in the event of a miss either side of the headline number?”
“In June US CPI unexpectedly jumped sharply to a new 40 year high of 9.1%, prompting brief speculation that the Federal Reserve might be tempted to go for a 100bps rate move in July.”
“While the headline number grabbed all the attention it was notable that core prices fell back from 6% to 5.9%.”
“Speculation about a 100bps rate move in July didn’t last very long as two of the most hawkish members of the FOMC, Waller and Bullard pushed back against the idea, saying that they felt that 75bps was sufficient, however a similarly strong number today could prompt similar speculation about 100bps at the September meeting.”
“We’ve already started to see weakness in broader commodity prices, as well as in prices paid data in recent months, which suggests that headline inflation could well have peaked in the short term.”
“Expectations are for a fall to 8.7%, largely due to recent sharp falls in gasoline and other energy prices, however the bigger concern is with core prices which are expected to rise from 5.9% to 6.1%.”
“A strong number here could raise concerns about embedded inflation, and as such feed into a narrative that could see the Fed overtighten in an attempt to squeeze inflation out of the system. “
Insurance companies were in focus in London with results from Aviva, Prudential and Admiral.
Aviva reported a 14% increase in operating profit to £829mln in the six months to June in what group chief executive officer, Amanda Blanc, described as “an excellent six months.”
She added “Trading has been encouraging across all our major businesses in insurance, wealth and retirement.”
“We are increasingly confident in Aviva's prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full year results." Blanc said.
The company said the size of any buy back would be determined at the year end.
Prudential announced 8% growth in operating profit to $1,661mln although it said new business profit fell by 5% to $1,098mln following the impact of higher interest rates and differences in the geographical and channel mix.
Mark FitzPatrick, group chief executive, said: “Although there are signs that Covid-19-related impacts in many of our markets are stabilising, over the remainder of the year we expect that operating conditions may continue to be challenging.”
Admiral reported a sharp fall in operating profits to £257.2mln from £488.1mln in the six months to June 2022 with UK Insurance profits of £322mln, 41% lower than 2021 with higher current period claims and lower reserve releases and profit commission.
But the group did announce a special dividend to shareholders of 15.8p together with an interim payout of 44.2p.
A further special dividend of 45p has also been declared reflecting the final payment of the phased return to shareholders of the proceeds from the sale of the Penguin Portals.
7.00am: Weak start expected in London
Shares in London are seen making a weak start on Wednesday following falls in the US and Asia overnight and with investors eyeing today’s US CPI numbers.
Spread betting companies are calling the FTSE 100 down by around 20 points in early trading.
Results from companies including Aviva, Prudential, Deliveroo and TUI (LON:TUIT) will also provide some early direction.
US stock indexes closed lower as investors weighed in on a batch of disappointing company reports and economic data ahead of the key inflation reading..
The Dow closed down 58 points, or 0.2% at 32,774, and the S&P 500 dipped 18 points, or 0.4% to close at 4,122..
Meanwhile, chipmakers again dragged down the Nasdaq Composite which shed 151 points, or 1.2% to 12,494.
The declines came after memory chipmaker Micron warned that revenue may fall short of its prior guidance because of “macroeconomic factors and supply chain constraints.”
Micron shares dipped more than 3.5%. In addition, shares of NVIDIA Corporation (NASDAQ:NVDA) fell nearly 4% to $170.86, a day after the stock tumbled roughly 6% as a result of a significant revenue miss.