Positive CPI reading raises hopes of a summer cut in interest rates / Image Source: Adbobe

Stock prices in London were in the green at Wednesday midday, amid data showing consumer price inflation ebbed to the 2% target in May, ahead of the Bank of England’s next interest rate decision due Thursday.

The FTSE 100 index was up 4.76 points, or 0.1%, at 8,195.96. The FTSE 250 was up 38.44 points, or 0.2%, at 20,448.68, and the AIM All-Share was up 1.75 points, or 0.2%, at 780.07.

The Cboe UK 100 was flat at 815.64, the Cboe UK 250 was up 0.2% at 17,805.81, and the Cboe Small Companies was up 0.4% at 16,689.73.

Local stocks ticked higher, after data showed that the UK has dropped back to the 2% Bank of England target for the first time since July 2021.

According to the Office for National Statistics, the rate of yearly consumer price growth faded to 2.0% in May, from 2.3% in April. The reading was in-line with the FXStreet cited consensus.

The rate of inflation stood as high as 11.1% in October 2022, but has faded, albeit in a bumpy fashion, since then. The rate of inflation last sat at the target range back in July 2021.

The data will give the BoE some food for thought, ahead of Threadneedle Street’s interest rate decision at midday on Thursday. No change to bank rate, currently at a 16-year high of 5.25%, is expected. However, the cooler inflation readings could open the door for a summer rate cut.

‘We think that the clear signs of progress towards the BoE’s inflation target may be enough to elicit a dovish tweak in the MPC’s communications on Thursday. There will be no press conference this month, but the statement could hint that a first UK rate cut may be on the way in August,’ said Ebury analyst Matthew Ryan commented.

Separate data showed UK producer input prices decline 0.1% annually in May, easing from a 1.4% fall in April. On a monthly basis, producer input prices were flat in May, but topped expectations of a 0.2% fall. Prices had risen 0.8% in April from March.

On the UK election front, Shadow Chancellor Rachel Reeves will outline how Labour’s energy policies will aim to save £300 for families, while Prime Minister Rishi Sunak embarks on his ‘moral mission’ to cut taxes, as campaigning continues.

Reeves will visit the South West and accuse the Conservatives of being ‘staggeringly out of touch with the struggles facing ordinary families’ in comments ahead of the release of May’s inflation data.

The Tories, meanwhile, reiterated their demand that Keir Starmer rule out a series of potential tax measures which they claim would be needed to fill a ‘£38.5 billion black hole’ in Labour’s plans.

Sunak’s party republished a list of 17 tax hikes they say Labour could make, but the ppposition has said they would refuse to be drawn into the trap of responding to each claim.

Meanwhile, in European equities on Wednesday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.3%.

Eurozone construction output declined on both an annual and monthly basis in April, numbers on Wednesday showed.

According to Eurostat, construction production in the single currency area weakened 0.2% in April from May. Production had fallen 0.5% in March from February.

Annually, output slid 1.1%, worsening from a 0.7% fall in March. It is the third-successive month construction production in the eurozone has fallen on-year. It had slumped 1.9% in February.

The pound was quoted at $1.2737 at midday on Wednesday in London, up compared to $1.2693 at the equities close on Tuesday. The euro stood at $1.0749, up against $1.0736. Against the yen, the dollar was trading at JP¥157.85, down compared to JP¥157.97.

In London, Spectris dropped 6.5%. It cautioned that its 2024 profit could fall marginally shy of consensus, as the supplier of high-tech instruments, test equipment and software noted weaker demand in China.

In its Malvern Panalytical unit, the firm said the tepid China demand, a reduction in battery development, an easing of electric vehicle sales and ‘subdued’ trading in pharmaceuticals will hurt first-half sales and operating profit by £15 million and £10 million.

Spectris noted that is in addition to £15 million and £10 million hits to sales and profit for the first-half due to the firm rolling out a new ERP system earlier this year. Spectris, however, noted that system hit will have no impact on its full-year outturn, as the lost earnings will be retrieved in the second half.

Alpha Financial gained 23%.

The specialist consultancy services to the financial services industry confirmed a non-binding takeover offer from Bridgepoint Advisers, valuing the business at 505 pence per share in cash.

The board, it said, is minded to recommend the takeover offer to shareholders. Bridgepoint has a Thursday put-up-or-shut-up deadline.

Last month, Alpha Financial confirmed that BridgePoint Advisers was considering a cash offer. At the time, it said that Cinven was also ‘considering a possible offer’, but had not yet submitted any indicative proposal.

Miniature wargames maker, Games Workshop, rose 8.3%.

For the financial year ended June 2, it expects to report core revenue of at least £490 million, a rise of 10% from £445.4 million. Pretax profit of at least £200 million is predicted, a rise of 17% from £170.6 million.

On AIM, Arrow Exploration surged 16%.

The oil exploration firm said it has put the first of four Ubaque horizontal wells planned for 2024 into production. The first horizontal well, it said, is ‘exceeding expectations’.

Stocks in New York were seen mainly higher. The Dow Jones Industrial Average was called down 0.1%, but the S&P 500 index and the Nasdaq Composite were seen 0.1% and 0.2% higher respectively.

Brent oil was quoted at $85.27 a barrel at midday in London on Wednesday, up from $85.02 late Tuesday.

The black stuff continued to strengthen, after popping above the $84 per barrel mark on Tuesday, building on strong gains the previous day.

According to analysts at Saxo Bank, oil prices were supported by funds rebuilding long positions, as a summer supply deficit emerged in Europe. This was despite recent data, which showed that Chinese refineries were operating at their slowest pace this year.

In addition, an improving global energy demand outlook and expectations that major oil producers will keep supply tight buoyed oil prices, Hargreaves Lansdown analyst Guy Lawson-Johns said.

Early this month, Opec+ decided to extend production cuts into the third quarter this year, in a bid to boost prices.

‘On the supply side, key Opec+ members such as Russia and Iraq reaffirmed their adherence to production quotas,’ Lawson-Johns said, adding that Saudi Arabia also indicated a willingness to adjust output in response to market conditions.

Gold was quoted at $2,328.00 an ounce, up against $2,324.20.

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Issue Date: 19 Jun 2024