- FTSE 100 opens slightly higher, UK CPI above expectations
- Increases in food and fuel prices push CPI over 10%
- Entain (LON:ENT) hit by £17mln fine by the Gambling Commission
FTSE 100 made cautious early progress, and despite stronger than expected UK CPI figures, which Samuel Tombs, chief UK economist at Pantheon Macroeconomics described as an “ugly print.”
Big increases in food and fuel prices drove a rise in the CPI number to 10.1% in July from 9.4% in June, above City expectations for a 9.8% advance.
At 8.20am the blue chip index was trading up 16.04 points at 7,552.10 while the broader and more domestically focused FTSE 250 fell 46.35 points to 20,336.41.
Martin Beck, chief economic advisor to the EY ITEM Club said the sixth successive rise in CPI inflation and surprising on the upside “increases the chances of the Bank of England going for another 50bps rise in the bank rate in September.”
But he did have some hope saying “the inflationary outlook is not all bad. Recent falls in the price of oil and agricultural commodities suggest that fuel and food price inflation may have been close to a peak in July.”
“Global shipping costs have also fallen and supply-side pressures in general have eased, pointing to core goods inflation decelerating over the next few months.”
“But as things stand, these disinflationary forces are still set to be out-balanced by the consequences for energy bills of rising wholesale gas prices” which could see the CPI above 12% in October.
“Whether inflation gets that high will depend on two current unknowns. The first is the scale and nature of further government aid to hold down bills.”
“The second is whether the ONS will reflect fiscal interventions in its inflation calculations. On that subject, the ONS will announce on 31 August how it intends to treat the already-announced £400 discount on bills.”
Betting group, Entain PLC (LSE:ENT), fell 1.88% after being fined £17mln by the Gambling Commission for social responsibility and anti-money laundering failures at its online and land-based businesses.
Entain will pay £14mln for failures at its online business LC International Limited which runs 13 websites including ladbrokes.com, coral.co.uk and foxybingo.com and it will also pay £3mln for failures at its Ladbrokes (LON:LCL) Betting & Gaming Limited operation which runs 2,746 gambling premises across Britain.
Brighter news from Balfour Beatty (LON:BALF), where shares rose 4% to 312.40p, after the construction group upgraded full year guidance after interim profits more than doubled and new orders rose 10%.
The company posted a pre-tax profit of £83mln, up from £35mln a year earlier and now expects annual earnings to be ahead of previous expectations.
7.55am: CPI numbers an "ugly print"
Samuel Tombs, chief UK economist at Pantheon Macroeconomics described today’s UK inflation numbers as an “ugly print.”
CPI inflation increased to 10.1% in July, from 9.4% in June, above both the consensus of 9.8%, and the MPC’s 9.9% forecast in August’s Monetary Policy Report. Core CPI inflation rose to 6.2%, from 5.8%, also above the consensus of 5.9%.
Tombs noted the rise reflected increases in a wide range of components with food CPI inflation up to 12.6% (the highest rate since August 2008) from 9.8%. particularly noticeable.
But Tombs said “the upside surprise relative to the MPC’s forecast was primarily accounted for by the surge in food prices, so July’s data shouldn’t make much difference to the near-term outlook for the bank rate.”
Tombs said he expects the headline rate of CPI inflation to fall a little in August and September, as the recent fall in oil prices gets passed on to consumers at the petrol pump with motor fuel’s contribution to the headline rate estimated to be 0.5 percentage points smaller in September than in July, if the Brent crude price remains near its current $92pb level.
But he cautioned the headline rate then will soar to around 13% in October, when Ofgem will increase its default tariff price cap by about 80%.
7.30am: London seen higher despite strong CPI data
Shares in London are expected to open slightly higher despite stronger than expected growth in UK inflation in July 2022.
Spread betting companies are calling the lead index up by around 12 points.
The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to July 2022, up from 9.4% in June.
Rising food prices plus increases in electricity, gas and other fuels, transport and food and non-alcoholic beverages contributed to the latest figures.
The data will put further pressure on the Bank of England to raise interest rates to try and dampen the building inflationary pressures.
Chirag Shah, CEO and Founder of Nucleus Commercial Finance, commented: “Inflation continues to escalate, and with it, so does the challenge to UK SMEs.”
“The narrative is quite rightly dominated by the impact on households, but the plight of businesses demands attention too.”
“Not only are they seeing their overheads squeezed further, but they are also faced with the prospect of contracting demand as well. It’s a perfect storm.”
“UK businesses may be able to get by for a while by battening down the hatches, but that’s nothing more than a short-term strategy and all indicators suggest that this is not blowing over any time soon.”
“Markets are worried, consumers are anxious, and there’s leadership uncertainty in Number 10. Johnson’s successor must deliver clear, decisive, and impactful policies from the outset of their tenure.”
“Working closely with the business community, it is essential that they not just take the necessary steps to rein in inflation, but also give much needed financial support to UK SMEs that enables them to continue to drive the UK forward.”
Michael Hewson chief market analyst at CMC Markets UK: said “It’s also an important day for US markets with questions continuing to get asked about the resilience of the rebound off the June lows. Today we have the latest retail sales numbers for July and the latest FOMC minutes.”
“US retail sales have been positive every single month this year, apart from a modest -0.1 fall in May. If higher prices are deterring consumer spending, it’s not immediately obvious in these numbers.”
Housebuilder Persimmon (LON:PSN) reported a drop in half year pre-tax profits of £439.7mln in the six months to June 30th against £480.1mln last year.
The group said “it had made a robust start to the second half; average private sales rates for the first seven weeks are 11% down year on year against a strong comparator and as we return to a more normal seasonal pattern, and up 8% on 2019 being the most recent, more typical trading year.”
Dean Finch, group chief executive, said “We are on track to achieve a c.10% increase in our active outlets by the end of the current year as we work to rebuild our outlet position after a land buying pause three years ago and are tackling the on-going challenges in the planning system.”
“We continue to expect our volume delivery to be significantly higher in the second half of the year” he added.”
6.55am: London seen opening higher
FTSE 100 seen opening slightly higher on Wednesday with investors awaiting inflation numbers in the UK.
Spread betting companies are calling the lead index up by around 15 points.
Inflation takes centre stage again with the UK's consumer price index having hit another record high in June of 9.4%.
Although core prices slipped back to 5.8%, further rises in producer and output prices suggested that more pain was coming down the line.
US stocks were mixed overnight, the Dow closed Tuesday up 240 points, 0.7%, at 34, 152, the Nasdaq Composite dropped 26 points, 0.2%, to 13,103 and the S&P 500 added 8 points, 0.2%, to end at 4,305.
The retail sector made gains, led by Walmart Inc (NYSE:NYSE:WMT) (Walmart Inc (NYSE:WMT)) and The Home Depot Inc (NYSE:HD), shares of which 5% and 4%, respectively, after reporting earnings. Target Corporation (NYSE:NYSE:TGT) (Target Corporation (NYSE:TGT)) gained more than 4% in anticipation of its own earnings after the closing bell on Wednesday, while Lowe's Companies Inc (NYSE:LOW) stock improved nearly 3% ahead of its own report.
6.50am: Early Markets - Asia / Australia
Asian shares were mostly higher on Wednesday as New Zealand’s central bank lifted the official cash rate by 0.5% to 3%.
The Shanghai Composite in China gained 0.44% while Hong Kong’s Hang Seng index traded 0.99% higher.
Japan's Nikkei 225 surged 1.11% but South Korea’s Kospi slipped 0.78%.
Australia’s S&P/ASX200 advanced 0.34%, led by consumer discretionary, staples, industrials and real estate stocks.
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