London midday: Stocks extend gains on trade deal hopes; inflation falls
London stocks had extended gains by midday on Wednesday, with sentiment underpinned by hopes of an extension the Sino-US trade truce, as investors digested news that UK inflation fell to a two-year low last month.
The FTSE 100 was up 0.7% at 7,184.60, while the pound was 0.1% higher against the dollar at 1.2899 and 0.2% firmer versus the euro at 1.1400 as figures from the Office for National Statistics showed inflation nudged below the Bank of England's 2% target for the first time in two years in January amid rising energy prices.
The consumer price index, which includes owner-occupiers’ housing costs, was 1.8% last month, down from 2% in December. Analysts had been looking for a slightly smaller decline, to 1.9%.
The largest downward contribution came from electricity, gas and petrol. Gas prices saw their largest one-month decrease since records began in 1988 following the introduction of a price cap on standard variable tariffs by regulator Ofgem.
That fall in energy prices was partially offset by rising ticket prices for ferries and by air fares, however, which saw prices fall but by less than a year earlier.
The core rate of inflation, which strips out more volatiles components such as energy, was unchanged at 1.9%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the fall below 2% was good news for households, but "a further substantial fall isn’t likely".
"All told, CPI inflation looks set to remain marginally below the 2% target this year, though the later timing of Easter than in 2018 will cause the headline rate to jump temporarily in April. Past experience shows, however, that low inflation won’t stop the Monetary Policy Committee from raising the bank rate later this year if, as we expect, the economy regains some momentum following relief that a no-deal Brexit has been averted."
More broadly, the positive mood came after US President Trump said he could extend the 1 March deadline to reach a trade deal with China if the two sides are making good progress.
Oanda analyst Craig Erlam said: "We may not have reached a point at which an agreement is imminent but the acknowledgement that they could let the deadline slide is encouraging, both in terms of it being a sign of progress and the elimination of near-term tariff risks."
Talks between US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are due to start on Thursday.
On home turf, the government was trying to downplay suggestions that it would delay the UK's exit from the European Union. The denial came after reports that Prime Minister Theresa May's chief negotiator Olly Robbins was overheard in a Brussels bar on Tuesday night saying MPs would be given a stark late choice between her deal and a lengthy delay to Article 50.
Brexit Secretary Stephen Barclay said an extension of Article 50 was not on the government's agenda. He said it was "not in anyone’s interests to have an extension without any clarity. It is actually very disruptive to the European parliament".
In corporate news, Smurfit Kappa gained as it said it fell to a paper loss last year due to charges from its unwanted exit from Venezuela, but the Irish packaging group's core businesses still delivered a strong improvement in profits and cash flow. Peer DS Smith also climbed.
Rolls-Royce rallied after an upgrade to 'outperform' from Credit Suisse, while Dunelm advanced as the home furnishings retailer as it reported a 16.7% jump in first-half pre-tax profit and a 1.2% rise in revenue, with like-for-like revenue growth in both stores and online.
BHP Group rose after it approved $696m (£539m) in funding to develop its share of the Atlantis Phase 3 project in the US Gulf of Mexico and Tullow Oil gushed higher after well-received full-year results.
Galliford Try surged as the construction company reported a 4% increase in pre-exceptional pre-tax profit for the first half and said its full-year turnout is expected to come in at the upper end of analysts' current range.
InterContinental Hotels was higher as it announced the acquisition Six Senses Hotels Resorts and Spas from Pegasus Capital Advisors for $300m in cash.
Going the other way, gold and silver miner Hochschild Mining lost its shine as it announced plans to suspend operations at its Arcata precious metal mine in south west Peru and place it on maintenance and care.
Tour operator Tui was getting whacked again a day after its first-quarter results and a week after it issued a profit warning, while Derwent London and Great Portland Estates fell on the back of initiations at 'sell' by Berenberg.
Market Movers
FTSE 100 (UKX) 7,184.60 0.72%
FTSE 250 (MCX) 18,975.73 0.80%
techMARK (TASX) 3,463.69 0.61%
FTSE 100 - Risers
Smith (DS) (SMDS) 351.50p 4.61%
Smurfit Kappa Group (SKG) 2,348.00p 3.62%
Rolls-Royce Holdings (RR.) 940.00p 2.89%
Antofagasta (ANTO) 862.60p 2.89%
Melrose Industries (MRO) 164.70p 2.71%
Whitbread (WTB) 4,883.00p 2.52%
Persimmon (PSN) 2,453.00p 2.42%
British American Tobacco (BATS) 2,812.50p 2.35%
3i Group (III) 930.40p 2.24%
DCC (DCC) 6,755.00p 2.04%
FTSE 100 - Fallers
TUI AG Reg Shs (DI) (TUI) 844.80p -4.74%
Pearson (PSON) 925.00p -1.80%
Morrison (Wm) Supermarkets (MRW) 236.40p -1.34%
Tesco (TSCO) 220.80p -1.21%
Relx plc (REL) 1,711.00p -0.93%
Ocado Group (OCDO) 940.20p -0.91%
Land Securities Group (LAND) 882.80p -0.88%
Sainsbury (J) (SBRY) 282.20p -0.60%
SSE (SSE) 1,187.50p -0.38%
Centrica (CNA) 137.88p -0.34%
FTSE 250 - Risers
Galliford Try (GFRD) 771.50p 7.15%
Tullow Oil (TLW) 220.24p 4.38%
Babcock International Group (BAB) 547.20p 3.52%
Dunelm Group (DNLM) 741.05p 3.35%
Premier Oil (PMO) 74.46p 3.34%
Redrow (RDW) 595.34p 3.27%
Playtech (PTEC) 390.17p 3.16%
Hilton Food Group (HFG) 924.00p 3.12%
Petrofac Ltd. (PFC) 392.80p 2.96%
Just Group (JUST) 98.40p 2.88%
FTSE 250 - Fallers
TBC Bank Group (TBCG) 1,414.00p -2.08%
Assura (AGR) 57.68p -1.73%
Plus500 Ltd (DI) (PLUS) 1,115.23p -1.57%
Man Group (EMG) 139.66p -1.54%
Just Eat (JE.) 731.40p -1.43%
Daejan Holdings (DJAN) 5,780.00p -1.37%
Great Portland Estates (GPOR) 729.80p -1.24%
Workspace Group (WKP) 951.50p -1.19%
Moneysupermarket.com Group (MONY) 312.50p -1.11%
F&C Commercial Property Trust Ltd. (FCPT) 126.70p -1.02%