London midday: Stocks little changed after inflation data; trade deal eyed

London stocks were still little changed by midday on Wednesday as investors mulled the latest UK inflation figures and looked ahead to the signing of the 'phase one' trade deal between the US and China.

The FTSE 100 was up 0.1% at 7,629.51, showing little movement as concerns about the trade deal crept in after US Treasury Secretary Steven Mnuchin confirmed late on Tuesday that tariffs on $360bn of Chinese goods would remain in place until there is a 'phase 2' deal.

His comments followed a Bloomberg report which suggested that existing tariffs on Chinese goods coming into the US were likely to remain until after the US presidential election. Citing people familiar with the matter, Bloomberg said any move to reduce the tariffs will hinge on Beijing’s compliance with the terms of the phase one deal.

It said the two sides have an understanding that no sooner than 10 months after the signing of the agreement at the White House on Wednesday, the US will review progress and potentially consider additional cuts on tariffs affecting $360bn of imports from China.

Spreadex analyst Connor Campbell said: "The chances of a ‘phase 2’ agreement ever actually materialising feel rather slim given how tortuous the process was to reach the comparatively simple ‘phase one’ deal."

On home shores, a rate cut at the end of this month was looking increasingly likely after the UK inflation rate fell to its lowest for more than three years in December. The consumer price index fell to 1.3% from 1.5% in November, marking the lowest reading since November 2016 and coming in below consensus expectations of no change. It was weighed down mainly by weakness in accommodation services and clothing.

Core inflation, which strips out all volatile components, was 1.4%, well below the expected no change on November’s 1.7%.

Neil Wilson, chief market analyst at Markets.com, said: "This gives the Bank of England all the excuse it needs to cut later this month. Coming off the back of those weaker GDP and industrial production numbers, it does not look as though the economy was firing on all cylinders at the tail end of last year. While there may well be a Boris Bounce in the offing, I rather think the die is cast in favour of a rate cut."

In equity markets, Persimmon was in the green even as the housebuilder reported a fall in full-year revenue as it spent more cash fixing poor quality homes after an independent review last month slammed the standards of the company's work.

Provident Financial rallied as the doorstep lender said profits for 2019 were set to meet market expectations following a solid performance from Vanquis Bank in the fourth quarter. Investors also cheered news that it had agreed a bilateral securitisation facility with NatWest Markets to fund Moneybarn business flows. The new facility provides up to £100m of initial funding and is expected to grow to £275m over the next 18 months.

Tullow Oil gained after a well-received trading update, while Hochschild Mining was higher as it maintained its 2020 production forecasts.

Shares of Capita advanced after Goldman Sachs reiterated its ‘buy’ rating on the outsourcer, hiked the price target and added it to the Conviction List.

On the downside, Royal Bank of Scotland slumped after a downgrade to ‘underweight’ at Barclays, while Rathbone Brothers fell after an initiation at ‘underperform’ by Jefferies.

Luxury car maker Aston Martin was also weaker after Jefferies said in a note that it was likely to need at least £400m of fresh equity, "which in itself may not ensure sustained profitability".

Diploma retreated despite saying it traded in line in the first quarter and backing its expectations for the full year.

Market Movers

FTSE 100 (UKX) 7,629.51 0.09%
FTSE 250 (MCX) 21,712.29 -0.20%
techMARK (TASX) 4,259.92 0.51%

FTSE 100 - Risers

Ocado Group (OCDO) 1,338.00p 2.69%
Hikma Pharmaceuticals (HIK) 1,983.00p 1.98%
Carnival (CCL) 3,662.00p 1.78%
Coca-Cola HBC AG (CDI) (CCH) 2,757.00p 1.70%
Smurfit Kappa Group (SKG) 2,870.00p 1.56%
Burberry Group (BRBY) 2,306.00p 1.54%
Pearson (PSON) 614.20p 1.52%
Aveva Group (AVV) 4,938.00p 1.44%
Hargreaves Lansdown (HL.) 1,834.50p 1.24%
AstraZeneca (AZN) 7,783.00p 1.20%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 225.10p -2.43%
Prudential (PRU) 1,423.00p -2.13%
Kingfisher (KGF) 214.70p -1.74%
TUI AG Reg Shs (DI) (TUI) 904.80p -1.44%
NMC Health (NMC) 1,366.50p -1.34%
easyJet (EZJ) 1,489.50p -1.29%
Standard Chartered (STAN) 707.40p -1.28%
Croda International (CRDA) 5,080.00p -1.26%
RSA Insurance Group (RSA) 555.60p -1.24%
Barclays (BARC) 178.92p -1.15%

FTSE 250 - Risers

Provident Financial (PFG) 447.20p 6.00%
Spirent Communications (SPT) 242.50p 3.85%
Centamin (DI) (CEY) 122.15p 3.21%
Hochschild Mining (HOC) 168.70p 2.80%
Capita (CPI) 174.15p 2.44%
Avast (AVST) 522.00p 2.35%
Marshalls (MSLH) 830.50p 1.65%
Royal Mail (RMG) 222.10p 1.55%
Dunelm Group (DNLM) 1,126.00p 1.53%
Barr (A.G.) (BAG) 553.00p 1.47%

FTSE 250 - Fallers

Just Group (JUST) 73.75p -5.08%
Rathbone Brothers (RAT) 2,005.00p -4.52%
Aston Martin Lagonda Global Holdings (AML) 445.60p -3.17%
Moneysupermarket.com Group (MONY) 322.60p -3.12%
Diploma (DPLM) 1,855.00p -2.42%
Wizz Air Holdings (WIZZ) 4,229.00p -2.31%
Games Workshop Group (GAW) 6,800.00p -2.30%
Hammerson (HMSO) 266.30p -2.28%
Galliford Try (GFRD) 154.98p -2.07%
IP Group (IPO) 66.30p -2.07%