London close: Forties failure lifts FTSE as inflation spikes
London stocks extended their gains on Tuesday as supply disruptions boosted the energy sector and investors mulled higher than expected UK inflation figures.
The FTSE 100 added almost 47 point or 0.6% to finish at 7,500.41, while the pound was up 0.2% against the euro to 1.1358 but down 0.1% on the dollar at 1.3326, following a brief spike higher on the back of the latest inflation figures.
Data released earlier by the Office for National Statistics showed UK consumer price inflation has risen so high that Bank of England governor Mark Carney, who will gather his Monetary Policy Committee minions later in the week to discuss interest rates, will have to write a letter to the Chancellor in the New Year to explain why and what he intends to do about it.
Carney previously stated that he believed that inflation had peaked back in October and November, however this figure shows an increase in prices as November's consumer price index was 3.1% higher year on year, the highest rate since March 2012 and up from the 3% at which it has been for the previous two months. The consensus forecast had been for it to remain at 3%.
Annual CPI growth was lifted by a 0.3% month-on-month increase in November, which was up from the 0.1% rise in October and higher than the 0.2% consensus forecast.
Core CPI, which excludes more volatile prices such as for fuel and food, stayed at 2.7%, as economists had predicted.
"Importantly it is worthwhile differentiating between the headline and core measures, with the divergence between the two proving that the recent rise has more to do with energy prices than something monetary policy has an influence upon," said analyst Joshua Mahony at broker IG.
"Coming amid a UK-wide freeze, the shutdown of the UK forties pipeline, along with an explosion at the main Austrian gas import hub, points towards even more energy driven inflation in December."
Mahony said the initial sterling strength in the wake of the rise in inflation was been shortlived, with the pound losing ground with markets largely seeing the BoE rate hike as a ‘one and done’ scenario.
On the corporate front, British Gas owner Centrica was the standout gainer as UK gas prices rose after an explosion at a natural gas facility near Austria's border with Slovakia and as Britain's Forties pipeline - which carries 40% of North Sea oil and gas - has been closed for repair due to a crack and is expected to remain offline for some weeks.
Energy stocks BP and Shell gushed higher as oil prices rose due to the closure of the Forties pipeline, with oil services groups Petrofac, Tullow Oil and Cairn Energy also up. Petrofac also was lifted by winning a contract worth around $800m with BP for the at the Khazzan gas development in Oman.
Industrial equipment rental firm Ashtead rallied after it posted a 16% rise in half-year pre-tax profits to £493.1m and announced the start of a share buyback programme, of at least £500m and up to £1bn over the next 18 months.
Construction group Balfour Beatty was trading up after saying it is "increasingly confident" of improving margins this year as it continues to win new business on better terms, while Elementis was on the front foot after agreeing to sell its Netherland surfactants unit for €39m.
Leading the fallers, Sainsburys and Morrisons were in the red following the release of the latest data from Kantar Worldpanel and Nielsen. Sainsburys sales were 2% higher in the past 12 weeks, but the supermarket chain saw its market share drop to 16.3% from 16.5%. Meanwhile, Morrisons till receipts were up 1.4% and its share down two points to 10.6%.
Sainsburys was also likely taking a hit from its inclusion in a Goldman Sachs list of 10 Sell Ideas, with Next and William Hill - both weaker - also targeted by analysts.
In broker note action, Experian was boosted by an upgrade to 'outperform' at Exane, while Homeserve gained as JPMorgan Cazenove lifted the stock to 'overweight' and Grainger was up on the back of an initiation at 'overweight' by Barclays.
Mediclinic and Moneysupermarket were hit by downgrades from Cazenove, while Capital & Counties was weaker as Barclays initiated coverage of the stock at 'underweight'.
Pub group Greene King was under the cosh after a downgrade to 'underweight' from JPMorgan, with Marston's following suit.
Market Movers
FTSE 100 (UKX) 7,500.41 0.63%
FTSE 250 (MCX) 20,073.02 0.04%
techMARK (TASX) 3,483.51 0.54%
FTSE 100 - Risers
Experian (EXPN) 1,604.00p 2.49%
BP (BP.) 511.00p 2.47%
Admiral Group (ADM) 1,899.00p 2.37%
Centrica (CNA) 144.80p 2.33%
Micro Focus International (MCRO) 2,485.00p 2.10%
Ashtead Group (AHT) 2,060.00p 2.03%
Royal Dutch Shell 'A' (RDSA) 2,426.00p 1.70%
Severn Trent (SVT) 2,120.00p 1.68%
Standard Life Aberdeen (SLA) 424.30p 1.65%
Royal Dutch Shell 'B' (RDSB) 2,448.00p 1.47%
FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 211.40p -4.52%
Sainsbury (J) (SBRY) 234.60p -4.13%
CRH (CRH) 2,596.00p -1.70%
Fresnillo (FRES) 1,287.00p -1.45%
Ferguson (FERG) 5,265.00p -1.40%
Randgold Resources Ltd. (RRS) 6,745.00p -1.24%
Persimmon (PSN) 2,649.00p -1.23%
Taylor Wimpey (TW.) 201.40p -1.18%
Glencore (GLEN) 347.45p -1.10%
Whitbread (WTB) 3,859.00p -0.75%
FTSE 250 - Risers
Hikma Pharmaceuticals (HIK) 1,073.00p 4.38%
Petrofac Ltd. (PFC) 451.60p 3.82%
Elementis (ELM) 285.80p 3.21%
Homeserve (HSV) 809.50p 3.12%
Wizz Air Holdings (WIZZ) 3,563.00p 2.80%
Drax Group (DRX) 275.50p 2.49%
Tullow Oil (TLW) 194.90p 2.47%
Intermediate Capital Group (ICP) 1,079.00p 2.47%
Diploma (DPLM) 1,149.00p 2.41%
Pennon Group (PNN) 777.50p 2.10%
FTSE 250 - Fallers
Polymetal International (POLY) 835.50p -3.69%
Acacia Mining (ACA) 171.21p -3.33%
GVC Holdings (GVC) 929.00p -2.72%
Ladbrokes Coral Group (LCL) 172.80p -2.59%
Wood Group (John) (WG.) 679.00p -2.30%
Ultra Electronics Holdings (ULE) 1,260.00p -2.25%
Saga (SAGA) 126.50p -2.24%
Marston's (MARS) 118.60p -1.98%
Dunelm Group (DNLM) 706.00p -1.94%
Restaurant Group (RTN) 276.80p -1.84%