London close: Stocks gain as pound hit by stalling inflation, politics
London stocks rose on Wednesday as the pound was knocked lower by stalling inflation and politics, while updates from airline EasyJet and miner BHP Billiton lent a hand.
The FTSE 100 ended up 0.7% at 7,676.28, while sterling was off 0.5% against the dollar at 1.3054 and 0.4% versus the euro at 1.1206 after data from the Office for National Statistics showed the consumer prices index rose 2.4% year-on-year in June, coming in below expectations of 2.6% and unchanged from May.
Core inflation, which strips out fuel and food, was 1.9% against 2.1% last month. That was also below expectations; some analysts had predicted it would remain unchanged while others had even pencilled in a slight increase.
The downside surprise to core inflation entirely reflected a slump in core goods inflation to 1.3%, from 1.7% in May. Clothing retailers, in particular, cut prices more than usual for this year's summer sales, while food price inflation dropped to 2.0%, from 2.3% in May.
Michael Hewson, chief market analyst at CMC Markets, said: "The pound has continued to slide, worrying news for UK policymakers given that a lower pound exerts upward pressure on inflation. While some would argue that the weak inflation makes it less likely the bank will move next month, the fact remains inflation remains above target, and doing nothing could see further sterling weakness, which in turn would put upward pressure on prices. As such it is still probable that the Bank of England will push rates higher next month, in the absence of any data or political shocks between now and then."
The pound had been under pressure before the inflation release as Theresa May battled to keep her government together amid various important Brexit votes in the House of Commons.
Overnight, Brexiteers led by MP Jacob Rees-Mogg forced May to accept an amendment to her plans for a softer Brexit that commentators say will make it even more difficult for the European Union to accept her proposed customs arrangement. Confusingly the government lost to the Brexiters by winning the Commons vote 305 to 302.
In company news, EasyJet flew higher on the back of third-quarter revenues rising 14% to £1.6bn, as passenger numbers grew 9.3%. The budget carrier upped full-year profits guidance to £550-590m, from the previous £530-580m. British Airways owner IAG was lifted in its wake.
Miner BHP Billiton closed up after revealing fourth-quarter iron ore production rose 3% and raising 2019 guidance to +3%.
Building materials group CRH rose as it sold off its DIY business in the Netherlands and Belgium for €510m.
Cruise operator Carnival advanced as Norwegian peer Cruise Line said it expects to raise full-year guidance at its second-quarter results in August.
Going the other way, Ladbrokes owner GVC Holdings fell despite announcing a not-unsurprising boost from the World Cup in recent weeks that helped growth accelerate in the third quarter. Helped by 11% growth in the second quarter, group net gaming revenue grew 8% in the first half.
Smiths Group tumbled despite reporting a return to growth with underlying revenue for the 11 months to 30 June up 3%. All divisions were expected to be in-line with full-year expectations, except for a fall for Smiths Medical amid a suspension of some products ahead of new EU 2020 regulations.
Plastics manufacturer RPC also slumped as it revealed revenue from continuing operations for its first quarter was up 5.8%, benefitting from the contribution from Astrapak, polymer price tailwinds and organic growth of 2.0%. This is down from revenue growth of 33% last year, when organic growth was 2.8%.
Shares in water and waste company Severn Trent leaked slightly lower as it reiterated full-year guidance, with no material change to business performance or outlook.
Market Movers
FTSE 100 (UKX) 7,676.28 0.65%
FTSE 250 (MCX) 20,984.20 0.54%
techMARK (TASX) 3,598.67 0.52%
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 2,110.00p 3.18%
Evraz (EVR) 538.20p 2.99%
BHP Billiton (BLT) 1,668.60p 2.75%
Johnson Matthey (JMAT) 3,756.00p 2.43%
Prudential (PRU) 1,778.00p 2.36%
Ashtead Group (AHT) 2,412.00p 2.25%
CRH (CRH) 2,740.00p 2.24%
easyJet (EZJ) 1,688.50p 2.15%
Carnival (CCL) 4,473.00p 1.94%
Kingfisher (KGF) 315.10p 1.91%
FTSE 100 - Fallers
Smiths Group (SMIN) 1,625.50p -7.09%
Royal Mail (RMG) 467.50p -4.49%
Ocado Group (OCDO) 1,048.50p -2.19%
GVC Holdings (GVC) 1,090.00p -1.54%
Sainsbury (J) (SBRY) 324.00p -1.40%
Centrica (CNA) 153.80p -1.22%
Smith (DS) (SMDS) 494.60p -1.16%
DCC (DCC) 7,065.00p -1.05%
Coca-Cola HBC AG (CDI) (CCH) 2,750.00p -0.83%
Compass Group (CPG) 1,652.50p -0.78%
FTSE 250 - Risers
Aggreko (AGK) 697.60p 6.21%
FirstGroup (FGP) 91.30p 4.94%
RHI Magnesita N.V. (DI) (RHIM) 4,680.29p 4.47%
Elementis (ELM) 270.20p 4.32%
Go-Ahead Group (GOG) 1,528.00p 4.30%
Workspace Group (WKP) 1,128.00p 4.16%
Barr (A.G.) (BAG) 710.00p 3.65%
Sanne Group (SNN) 722.00p 3.59%
Stagecoach Group (SGC) 164.70p 3.58%
Inmarsat (ISAT) 547.60p 3.56%
FTSE 250 - Fallers
On The Beach Group (OTB) 463.00p -5.12%
Rank Group (RNK) 175.80p -4.25%
RPC Group (RPC) 747.40p -3.56%
Beazley (BEZ) 555.50p -3.31%
Dairy Crest Group (DCG) 469.00p -3.14%
Capita (CPI) 163.95p -2.47%
TalkTalk Telecom Group (TALK) 115.80p -2.44%
Contour Global (GLO) 244.00p -2.40%
Millennium & Copthorne Hotels (MLC) 537.00p -2.36%
Lancashire Holdings Limited (LRE) 570.00p -2.31%