London midday: Stocks extend gains as Glaxo rallies; inflation data digested

London stocks had extended gains by midday on Wednesday, bouncing back from the previous session's losses with GlaxoSmithKline in the lead on news of a tie-up with Pfizer, as investors digested inflation data and looked ahead to the Fed's policy announcement.

The FTSE 100 was up 0.9% at 6,762.21, while the pound was flat against the dollar at 1.2643 and 0.3% lower versus the euro at 1.1089.

Data released earlier by the Office for National Statistics showed inflation eased to a 20-month low in November, as a planned rise in the cost of tobacco was offset by falling prices at the petrol pump.

The consumer prices index was 2.2% in November, down from 2.3% in October and the lowest since March 2017. Including home occupiers’ housing costs, the rate was 2.2%, unchanged on the previous month. Core inflation, which strips out volatile energy prices, eased to 1.8% from 1.9%.

The changes were in line with economists’ expectations.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The drop in CPI inflation marks the beginning of a sharp fall over the coming months, which will be driven primarily by lower energy prices. Energy’s contribution to the headline rate fell to 0.5 percentage points in November, from 0.7pp in October, as the decline in oil prices began to filter through to petrol pumps."

Meanwhile, an industrial sector survey from the Confederation of British Industry came in better than expected. The CBI's total orders balance fell to +8 from +10 in November, but was ahead of consensus expectations for a reading of +6.

Sam Tombs said: "Taken at face value, the CBI’s survey suggests that the manufacturing sector finished 2018 on a strong note, with orders and output both growth at above-average rates. Indeed, the total orders balance is consistent on past form with year-over-year growth in manufacturing output of about 4%.

"Note, however, that the survey has been a very poor guide to the official measure of manufacturing output, which fell by 1.0% year-over-year in October."

While it is not due until the evening, the Fed's latest policy announcement was a major focus for traders.

IG market analyst Joshua Mahony said the market is pricing in a 67% chance of a rate hike and Donald Trump’s attempted interference is likely to have pushed the committee towards a fourth 2018 rate rise rather than away from it.

"However, as much as the rate rise itself will be important, all eyes will be on the dot plot of future expected rate moves, with a shift towards a less hawkish 2019 outlook providing the basis for a potential dollar decline."

Housebuilders were the best performers on the FTSE 350 as they recovered from recent losses, with Persimmon, Berkeley, Taylor Wimpey and Barratt Developments all trading higher.

In individual company news, GlaxoSmithKline was sitting pretty at the top of the FTSE 100 after agreeing a deal with Pfizer to combine their consumer health businesses into a joint venture generating £10bn of annual sales, before spinning it off as a separately listed company within three years.

GSK, which will have controlling stake of 68%, said the combination of the two businesses is expected to generate annual cost savings of £0.5bn by 2022 at a cash cost of £0.9bn and non-cash costs of £0.3bn.

Online gambling firm 888 Holdings surged after saying it expects full-year adjusted EBITDA to be in line with expectations as the second half delivered further progress against the group's strategic objectives. 888 said it had continued its momentum in Sport, Casino and across regulated European markets.

Sports betting and gaming group GVC Holdings gained as the government’s £2 limit on fixed-odds betting terminals kicked in, meaning it avoids a £676m payment over its takeover of Ladbrokes Coral.

Royal Mail was on the back foot after US parcel delivery company FedEx downgraded its outlook for the full year and warned that global trade has slowed in recent months, with leading indicators pointing to ongoing deceleration in global trade in the near term.

Weir Group was also under the cosh after a downgrade to 'neutral' by Goldman Sachs.

Market Movers

FTSE 100 (UKX) 6,762.21 0.90%
FTSE 250 (MCX) 17,547.02 0.30%
techMARK (TASX) 3,345.13 1.35%

FTSE 100 - Risers

GlaxoSmithKline (GSK) 1,553.20p 7.25%
Melrose Industries (MRO) 160.85p 3.21%
Persimmon (PSN) 1,923.50p 2.92%
Evraz (EVR) 475.30p 2.88%
Berkeley Group Holdings (The) (BKG) 3,430.00p 2.63%
Taylor Wimpey (TW.) 136.30p 2.40%
Barratt Developments (BDEV) 449.50p 2.37%
easyJet (EZJ) 1,103.00p 2.32%
Shire Plc (SHP) 4,466.50p 2.18%
WPP (WPP) 887.60p 1.95%

FTSE 100 - Fallers

Smurfit Kappa Group (SKG) 1,953.00p -3.89%
Randgold Resources Ltd. (RRS) 6,700.00p -2.70%
Royal Mail (RMG) 280.60p -2.16%
British American Tobacco (BATS) 2,528.50p -1.77%
Associated British Foods (ABF) 2,106.00p -0.89%
Smith (DS) (SMDS) 299.20p -0.80%
Imperial Brands (IMB) 2,296.00p -0.78%
Johnson Matthey (JMAT) 2,735.00p -0.58%
Paddy Power Betfair (PPB) 6,385.00p -0.55%
Antofagasta (ANTO) 766.65p -0.43%

FTSE 250 - Risers

888 Holdings (888) 183.00p 7.65%
Galliford Try (GFRD) 601.50p 6.37%
Just Group (JUST) 94.00p 3.98%
Computacenter (CCC) 996.71p 3.39%
CYBG (CYBG) 191.80p 3.28%
Petrofac Ltd. (PFC) 474.80p 3.22%
Elementis (ELM) 175.60p 3.17%
Mediclinic International (MDC) 330.50p 3.15%
Softcat (SCT) 581.00p 2.83%
Spire Healthcare Group (SPI) 108.80p 2.74%

FTSE 250 - Fallers

Weir Group (WEIR) 1,282.00p -3.90%
Indivior (INDV) 107.45p -3.80%
Kier Group (KIE) 400.60p -3.33%
Superdry (SDRY) 435.40p -3.24%
Thomas Cook Group (TCG) 28.36p -3.01%
Avast (AVST) 258.35p -3.00%
AA (AA.) 79.30p -2.75%
G4S (GFS) 189.75p -2.34%
Spirax-Sarco Engineering (SPX) 5,950.00p -2.30%
Hikma Pharmaceuticals (HIK) 1,849.50p -2.22%