London’s major stocks opened modestly lower as the inflation genie continues to work its way out of the bottle, although banks defied the gravitational pull.
At 9am, the benchmark FTSE 100 was 0.13% down at 7,317.61 after UK inflation rose to its highest in almost a decade. But there was plenty of demand for bank stocks, seen as benefitting from an increasingly likely rise in interest rates, with Lloyds Banking (LLOY) and NatWest (NWG) both on the up in early trade on Wednesday.
October’s CPI (consumer price index) inflation hit 4.2%, above the 3.9% estimated and well north of the Bank of England’s 2% target. It marked a steep acceleration from the 3.1% reading in September and underlines that inflation is becoming more of a problem, not less.
The good news is that pay is up 5.8%. The Bank of England’s Monetary Policy Committee noted in November that the decision not to raise rates was largely because they wanted to get more information about the health of the labour market.
‘Coupled with the strong employment data yesterday, the case for the Bank of England to act now is compelling,’ said Neil Wilson, market strategist at the Markets.com website.
The Office for National Statistics said household energy bills were the biggest driver of inflation following the lifting of a regulatory cap on bills last month, with gas prices paid by consumers up 28.1% in the year to October. British energy suppliers are grappling with soaring wholesale gas prices that have led to the collapse of a number of energy companies, forcing more than two million customers so far to switch providers, often to higher tariffs.
Sterling nudged up to $1.3448 against the greenback, up almost one-fifth of a cent, which is not helping the FTSE 100 much as many of its big names earn a lot of their revenues in dollars.
POWER FIRM SLUMPS
On the energy note, power network operator SSE (SSE) is among the leading FTSE 100 losers on Wednesday despite first-half profit more than doubling, as higher earnings at its distribution and transmission businesses offset losses at its renewables unit.
The utility group saw its share price slump 4.5% to £15.835.
SSE declared an interim dividend of 25.5p per share, up 4.5% from 24.4p year-on-year. It forecast full-year adjusted earnings per share ‘at least in line’ with the consensus forecast of 83p.
Thermal energy management and pumping specialist Spirax‐Sarco (SPX) topped the FTSE 100 loser board, down 5.5% at £16.06, after it warned that supply-chain issues were hurting margins.
Spirax‐Sarco said all three of its businesses had been impacted by shipment delays while also flagged forex headwinds. The company does still expect to report record annual profits though.
Miner and commodities trader Glencore (GLEN) softened 0.3% to 364.55p after it agreed to sell its stake in the Ernest Henry copper and gold mine in Australia to Evolution for A$1 billion.
Glencore also agreed to buy copper and gold from the mine as part of the deal.
CLOUD ADDS UP FOR SAGE
Enterprise software group Sage (SGE) topped the FTSE leader board on Wednesday after saying that it expects recurring revenue growth to accelerate after substantial cloud computing investment.
Sage forecast organic revenue growth in the current financial year of between 8% and 9%. The company reported a 7% fall in annual profit owing to increased investment spending and lower sales.
Credit data company Experian (EXPN) lost 1.4% to £34.63, even as it reported a 43% jump in first-half profit, led by growth in its consumer services business.
Despite forecasting full-year revenue growth of 15% to 17% and ‘strong’ margin growth investors have been left unimpressed. Experian declared an interim dividend of $0.16 per share, up 10% year-on-year.
Publishing and exhibitions group Informa (INF) slumped 4.7% to 497.76p even as it reiterated its guidance amid 'strong' growth in subscriptions-led businesses and improving momentum across B2B.
Informa was still expecting full-year adjusted operating profit of about £375 million and revenue of about £1.8 billion.
Property developer and investor British Land (BLND) fell 0.3% to 531.63p even as it swung to a £373 million pre-tax profit in the first half, underpinned by gains in the underlying value of its portfolio.
British Land declared an interim dividend of 10.32p per share, up from a 8.4p year-on-year.
Online broker CMC Markets (CMCX) shed 4.5% to 259.22p after more subdued trading activity brought its first-half profits down 75%.
CMS Markets slashed its interim dividend to 3.5p per share, down from 9.2p year-on-year.
SMALLER CAP WRAP
Convenience store group McColl’s Retail (MCLS) plunged 27% to 13.16p, having downgraded its annual earnings guidance, blaming supply-chain challenges.
McColl’s adjusted operating earnings for the year through December were now expected in the range of £20 million-to-£22 million.
Construction components supplier Tyman (TYMN) slipped 2.4% to 395.3p after it downgraded its annual earnings guidance, citing global supply-chain challenges.
Tyma’s adjusted profit for the year through December was now expected to be 'marginally below' consensus, even as revenue in the 10 months through October jumped 12% year-on-year.
Office rental group Workspace (WKP) added 0.8% to 868.5p as it swung to a modest first-half profit and reinstated its interim dividend, after an easing of pandemic lockdowns helped boost rental income.
Its pre-tax profit for the six months through September amounted to £3.4 million, compared to a year-on-year loss of £110.4 million. Workspace reinstated its interim dividend at 7p per share.
Storage group Safestore (SAFE) gained 1.4% to £12.78 on nudging up its annual earnings guidance after it grew its fourth-quarter revenue by 19%.
Full-year earnings were anticipated to be slightly ahead of previous guidance of 39.5p to 40p of adjusted diluted EPRA earnings per share.
Tools and equipment rental group Speedy Hire (SDY) firmed 5.6% to 67.4p, having swung to a first-half profit and upgraded its annual guidance, as construction markets recovered following an easing of lockdowns.
Speedy Hire reinstated its interim dividend at 0.75p per share. It said its full-year results were expected to be ‘ahead’ of current market expectations.