London close: Stocks mixed as US inflation comes in hot
London stocks closed in a mixed state on Wednesday after heavy losses in the previous session, as investors digested a serious pick-up in inflation across the pond, and mulled UK GDP data.
The FTSE 100 ended the session up 0.82% at 7,004.63, while the FTSE 250 was down 0.27% at 22,107.84.
Sterling was also trading mixed, and was last down 0.35% against the dollar at $1.4092, while gaining 0.2% on the euro to €1.1665.
“After getting body slammed yesterday, European markets have enjoyed a fairly decent rebound today, with the FTSE 100 leading the way higher - moving back above 7,000, although we still have some way to go to reverse yesterday’s losses,” said CMC Markets chief market analyst Michael Hewson.
“Today’s resilience is all the more surprising given that this afternoon's US CPI data came out much hotter than expected, at 4.2%, sending 10-year yields higher across the board.”
In the United States, the Labor Department said earlier in the afternoon that April's consumer price index rose 4.2% year-on-year, ahead of estimates for a print of 3.6% and making for the fastest pace of increase since September 2008.
The monthly gain was 0.8%, well ahead of the 0.2% advance expected on the Street.
Excluding food and energy prices, the core CPI rose 3% year-on-year and 0.9% on a monthly basis - with the latter jumping by the most since April 1982.
Leading the way was a 25% annual increase in energy prices and a 21% surge in used car and truck prices.
Commenting on Wednesday's CPI print, Ian Shepherdson, chief economist at Pantheon Macroeconomics, summed it up by telling clients "!".
Yet outside of the Covid-sensitive components, the data was "benign" he said, adding that "the Fed is not going to panic after one startling CPI report, so you can expect to hear even more about transitory bottleneck inflation pressures over the next few weeks."
In particular, he pointed out the sharp 10.0% rise in user car prices on the month, which alone added three tenths of a percentage point to the month-on-month jump in core CPI.
The underlying story here for Shepherdson was that people reluctant to use mass transit were opting for used cars - hence the "surge" in prices.
Closer to home, data out earlier showed the UK economy as contracting in the first quarter, as Covid restrictions and the third lockdown weighed, although the Office for National Statistics said it rebounded in March.
The economy shrank 1.5%, which was a touch better than the 1.6% decline forecast by economists, and was now 8.7% lower than its pre-pandemic level.
However, in March GDP grew 2.1% on the month following revised growth of 0.7% in February and a 2.5% contraction in January, beating consensus expectations for a 1.4% increase.
“The burst of growth in March shows that the recovery has been gathering momentum more quickly than we had thought and suggests that the risks to our forecast for the economy to return to its February 2020 level by the end of 2021 are to the upside,” said Ruth Gregory, senior UK economist at Capital Economics.
She said the 2.1% month-on-month gain was an "impressive" result given that there were few changes in the lockdown restrictions.
“The upside surprise came from construction output, which jumped by 5.8% month-on-month against consensus expectations for 1.0%, pushing it 2.4% above its pre-crisis level," she added.
In corporate news, Diageo pushed 3.4% higher as the drinks maker said it has restarted its £4.5bn plan to return capital to shareholders after business continued to recover in the second half of its financial year.
Spirax-Sarco Engineering rallied 1.95% after it said margins in the four months to April 30 were higher than expected following a rise in sales.
UDG Healthcare rocketed 20.67% as it agreed to be bought by private equity firm Clayton, Dubilier & Rice in a £2.6bn deal, and reported a "strong" first half.
Redde Northgate shares shot 6.85% higher as it said full-year profits are set to beat forecasts following a stronger-than-expected second half.
Marshalls gained 1.04% after the landscape products company said trading for the full year was set to be ahead of its previous expectations amid increased demand.
On the downside, Flutter Entertainment fell 4.46% after saying the boss of its US FanDuel operation had resigned and that his departure would affect the timing of a potential listing for the business in the US.
TUI was in the red by 2.13% after saying it plunged to a €1.5bn (£1.3bn) first-half loss and that it expects annual revenue to fall in the current year because of travel restrictions and reduced expectations for the summer season.
4imprint was knocked 3.23% lower by a downgrade to ‘hold’ at HSBC.
FTSE 100 - Risers
BP (BP.) 315.30p 3.51%
Diageo (DGE) 3,298.50p 3.40%
Royal Dutch Shell 'A' (RDSA) 1,412.80p 3.31%
Royal Dutch Shell 'B' (RDSB) 1,353.80p 3.04%
Pearson (PSON) 855.00p 2.22%
Sainsbury (J) (SBRY) 259.30p 2.13%
Spirax-Sarco Engineering (SPX) 11,795.00p 2.08%
Hargreaves Lansdown (HL.) 1,772.00p 2.07%
AstraZeneca (AZN) 7,786.00p 2.02%
Melrose Industries (MRO) 159.05p 1.96%
FTSE 100 - Fallers
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,280.00p -7.84%
Flutter Entertainment (CDI) (FLTR) 12,760.00p -4.46%
Renishaw (RSW) 5,420.00p -3.64%
Aveva Group (AVV) 3,107.00p -1.83%
Entain (ENT) 1,538.00p -1.69%
London Stock Exchange Group (LSEG) 6,972.00p -1.53%
Smith & Nephew (SN.) 1,507.00p -1.28%
Admiral Group (ADM) 2,876.00p -1.27%
Compass Group (CPG) 1,510.00p -1.21%
Intermediate Capital Group (ICP) 1,983.00p -1.15%
FTSE 250 - Risers
UDG Healthcare Public Limited Company (CDI) (UDG) 1,016.00p 20.67%
Redde Northgate (REDD) 390.00p 6.85%
Chemring Group (CHG) 294.50p 5.18%
HGCapital Trust (HGT) 335.00p 4.69%
Wood Group (John) (WG.) 285.20p 4.35%
Apax Global Alpha Limited (APAX) 200.50p 3.89%
Mitie Group (MTO) 62.00p 3.85%
FirstGroup (FGP) 76.65p 3.58%
Ferrexpo (FXPO) 501.00p 3.34%
ITV (ITV) 124.00p 3.12%
FTSE 250 - Fallers
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,280.00p -7.84%
Safestore Holdings (SAFE) 878.00p -3.46%
Cineworld Group (CINE) 89.36p -3.23%
4Imprint Group (FOUR) 2,250.00p -3.23%
Hammerson (HMSO) 36.34p -3.22%
FDM Group (Holdings) (FDM) 972.00p -3.19%
Allianz Technology Trust (ATT) 246.00p -3.15%
Vivo Energy (VVO) 105.00p -2.96%
Genus (GNS) 4,700.00p -2.61%
Chrysalis Investments Limited NPV (CHRY) 190.50p -2.56%