UK stocks opened lower on Wednesday after inflation surprisingly fell in February, defying expectations of a rise, with the weak data stoking concerns that persistent lockdowns are weighing on global growth.

The UK’s inflation rate unexpectedly fell to 0.4% last month, down from 0.7% in January and well below the 0.8% the market was expecting, with the cost of clothing notably tumbling.

Clothing and footwear prices fell between January and February for the first time since 2007 and are 5.7% lower than a year before, the largest yearly decline since November 2009. February is usually a month where clothing prices would rise.

Just before 9am, the UK’s benchmark FTSE 100 index fell 0.11% to 6,691.64, while the midcap FTSE 250 index dropped 0.13% to 21,304.48.

In other markets, Asian stocks have had a rough day with Japan’s Nikkei 225 plunging 2% as the Bank of Japan stopped ETF purchases, while the Hang Seng in Hong Kong also tumbled 2% as the country had to temporarily halt part of its vaccination campaign. China’s Shanghai Composite also headed lower with a 1.3% fall.

In the US, GameStop shares plunged more than 10% in after-hours trading overnight to $154 followings its first earnings report since the Reddit-led rally, with its sales and profit figures slightly below what analysts had expected and the firm mulling a cash call.

HALMA LIFTS PROFIT OUTLOOK

Safety equipment maker Halma (HLMA) gained 2.4% to £23.60 as it lifted its outlook on annual adjusted profit following ‘good progress’ in the second half of the year thanks to a further recovery in China.

Adjusted pre-tax profit for its 2021 financial year is expected to be similar to that of last year, compared to prior guidance of around 5% below its 2020 year, the company said.

Housebuilder Bellway (BWY) fell 0.9% to £34.60 as it reported a fall in first-half profit on lower margins, but it did reinstate its dividend on an upbeat outlook for the year.

For the half year ended 31 December, pre-tax profit fell to £280.2 million from £291.8 million year-on-year, while revenue increased 11.6% to £1.72 billion. Volume grew 6.3% to a record 5,656 homes, but the operating margin fell to 17.3%, from 19.3%.

Looking ahead, the company expects to sell 10,000 homes, up from 5,321 homes last year, with margins expected to be around 17%. The interim dividend was reinstated at 35p per share.

SOFTCAT SOARS

IT infrastructure provider Softcat (SCT) soared 11.7% to £17.42 after its first-half profit jumped 41% and it upgraded annual guidance as its customer base grew.

Pre-tax profit for the six months through January increased to £57 million, up from £40.5 million year-on-year, as revenue climbed 10% to £577 million. Softcat declared an interim dividend of 6.4p per share, up 19% year-on-year.

The company’s customer base rose 1.5% to 9,600, which it said came despite the ongoing challenges of remote working. ‘The second half has begun well and the board is confident the company will deliver a full-year result significantly ahead of its previous expectations,’ Softcat said.

Distributor Diploma (DPLM) moved 0.6% higher to £25.50 after a strong first-half performance that topped its expectations, driven by a boost from acquisitions and cost cuts.

For the six months ending 31 March 2021, underlying revenue is expected to be in line with the pre-Covid prior year period, and reported revenues are expected to be up 27%, reflecting a strong contribution from acquisitions.

Operating margin for the full-year expectations to be within the upper end of its guidance range. Current market consensus for the year ending 30 September 2021 is for the company to generate revenue of £742 million and adjusted operating profit of £133 million.

OTHER NEWS

Auto dealer Pendragon (PDG) reversed 4.9% to 17.5p, having posted a consecutive full-year loss after sales were dented by the pandemic. Pendragon’s pre-tax losses for the year through December amounted to £29.6 million, compared to year-on-year losses of £114.1 million, as sales skidded 35% to £2.92 billion.

Independent publisher Bloomsbury Publishing (BMY) jumped 8.6% to 291p as it said it expects annual revenue and profit to be ‘significantly ahead’ of upgraded market expectations on exceptional sales performance in February as the reading boom continued. ‘The popularity of reading during lockdown is a ray of sunshine in an otherwise very dark last year,’ the company said.

Investment trust Baillie Gifford Japan Trust (BGFD) shed 1.5% to £10.84, even as it reported a positive first-half performance underpinned by a rally in shares of SoftBank, Outsourcing, Sumitomo Metal Mining and MonotaRO.

In the six months to 28 February 2021, Baillie Gifford Japan’s net asset value total return per share rose 20.4%, compared with an 11.0% increase in the TOPIX total return.

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Issue Date: 24 Mar 2021