London midday: Stocks cling on to positive territory as inflation holds steady

London stocks were clinging on to positive territory by midday on Tuesday as the pound weakened after data showed inflation unexpectedly held steady in October.

The FTSE 100 was up 0.1% to 7,423.01, while the pound was down 0.5% against the euro at 1.1184 and flat versus the dollar at 1.3113 as the latest Office for National Statistics figures showed the UK consumer prices index held steady at a five-year high last month.

The CPI remained at 3% year-on-year for a second month, short of the 3.1% the market had expected and the 3.2% forecast by the Bank's monetary policy committee this month.

As inflation did not exceed the current 2% target by more than one percentage point, BoE Governor Mark Carney avoided the task of having to write an explanatory letter to the Chancellor.

Core CPI, which excludes more volatile prices like petrol and food, also remained unmoved, at 2.7%, when it had been seen rising to 2.8%.

ONS said growth in input prices for UK manufacturers is slowing rapidly, in line with an unwinding of the sterling depreciation effect on import prices seen during 2016.

Oanda analyst Craig Erlam said: “After getting off to another tough start on Tuesday, driven primarily by increased political risk and Brexit concerns, the pound suffered further losses as CPI data fell short of market expectations and those of the Bank of England. The central bank earlier this month raised interest rates after inflation - which it claimed would peak above 3% in October - rose above the level that policy makers would tolerate, even in these exceptional circumstances.

“However, with inflation having not risen as much as anticipated, the question of whether the BoE acted prematurely will likely be raised given the uncertain economic backdrop and significant headwinds facing the economy." Erlam said, noting that while the pound slid, it still remains range-bound against the dollar, euro and yen, despite the political risk, dovish rate hike and the data.

In corporate news, Tesco advanced after its takeover of wholesaler Booker was given provisional clearance by the UK competition authority following an in-depth review, while Vodafone rallied after it lifted its full-year earnings growth guidance to around 10% from 4% to 8%.

Housebuilders were boosted by a well-received update from Bovis Homes, which said it’s on track to meet its expectations for FY2017 and to deliver “significant improvements” in profits for FY18 amid robust demand.

Intermediate Capital Group advanced as it posted a 14% jump in first-half assets, while Computacenter gained after saying results for 2017 will now be “comfortably in excess” of its previous expectations.

Royal Mail was boosted by an upgrade to ‘outperform’ at Bernstein, while Polypipe rallied as it said revenue for the ten months ended 31 October was up 8.2% on the prior year.

BBA Aviation was higher after a well-received trading statement, as was the mixed update from Meggitt, which also detailed CEO succession plans.

Retirement housebuilder McCarthy & Stone was also in the black after it posted a drop in full-year profit amid increased build and incentive costs, but a rise in revenue that beat analysts’ expectations.

On the downside, broadcaster ITV reversed earlier gains to trade lower as it reported an easing in the television advertising crunch in the third quarter and further good growth in online and overseas sales of its Studios productions.

Fellow FTSE 100 group Land Securities also turned lower despite reporting a solid first half even in the face of Brexit headwinds.

Diversified engineer Smiths Group was in the red as it reported a drop in revenue for the first quarter mostly due to order timing, while Hikma Pharmaceuticals was broadly flat after announcing the acquisition of six products from Boehringer Ingelheim GmbH.

Market Movers

FTSE 100 (UKX) 7,423.01 0.11%
FTSE 250 (MCX) 19,888.29 0.51%
techMARK (TASX) 3,426.55 0.93%

FTSE 100 - Risers

Tesco (TSCO) 187.00p 5.65%
Vodafone Group (VOD) 226.85p 5.02%
NMC Health (NMC) 2,900.00p 3.57%
Berkeley Group Holdings (The) (BKG) 3,653.00p 1.56%
Informa (INF) 740.50p 1.44%
Persimmon (PSN) 2,693.00p 1.35%
Schroders (SDR) 3,469.00p 1.31%
BAE Systems (BA.) 544.00p 1.30%
Shire Plc (SHP) 3,544.50p 1.30%
Sainsbury (J) (SBRY) 230.20p 1.28%

FTSE 100 - Fallers

ITV (ITV) 150.30p -2.40%
Glencore (GLEN) 357.35p -1.81%
Babcock International Group (BAB) 739.50p -1.79%
Rio Tinto (RIO) 3,643.50p -1.50%
Imperial Brands (IMB) 3,080.00p -1.44%
BHP Billiton (BLT) 1,406.00p -1.19%
Anglo American (AAL) 1,480.50p -1.10%
Marks & Spencer Group (MKS) 311.00p -0.99%
British American Tobacco (BATS) 4,894.00p -0.87%
Land Securities Group (LAND) 933.50p -0.74%

FTSE 250 - Risers

Intermediate Capital Group (ICP) 1,005.00p 8.12%
Computacenter (CCC) 1,062.00p 7.49%
McCarthy & Stone (MCS) 157.30p 6.86%
Booker Group (BOK) 210.30p 5.89%
Polypipe Group (PLP) 398.70p 5.70%
Vesuvius (VSVS) 592.50p 4.13%
Just Group (JUST) 150.50p 3.44%
UBM (UBM) 741.00p 3.06%
Thomas Cook Group (TCG) 118.00p 2.88%
RPC Group (RPC) 921.50p 2.56%

FTSE 250 - Fallers

Cranswick (CWK) 2,959.00p -4.64%
Britvic (BVIC) 743.00p -2.75%
Inmarsat (ISAT) 503.00p -2.52%
Ultra Electronics Holdings (ULE) 1,201.00p -2.36%
Tate & Lyle (TATE) 694.00p -2.25%
FirstGroup (FGP) 107.50p -2.18%
Ferrexpo (FXPO) 244.50p -2.12%
Dignity (DTY) 2,207.00p -2.04%
Virgin Money Holdings (UK) (VM.) 281.00p -2.02%
Hochschild Mining (HOC) 233.60p -1.77%