Stocks were climbing into the week’s key risk event, the US consumer price index reading for December, due at 1330 GMT on Thursday.
London shares were responding to a mostly positive set of Christmas trading updates from UK retailers.
While equities climbed, the dollar struggled. Thursday’s price action brings with it the threat of a stock and foreign exchange market correction if the US inflation print comes in hotter than the 6.5% that is expected. In November, the US inflation rate was 7.1%.
The FTSE 100 index was up 58.11 points, or 0.8%, at 7,783.09 midday Thursday. The FTSE 250 was up 184.87 points, or 1.0%, at 19,706.57, and the AIM All-Share was 2.18 points, or 0.3%, higher at 853.80.
The Cboe UK 100 was up 0.7% at 778.83. The Cboe UK 250 surged 1.7%, at 17,204.58. The Cboe Small Companies was down 0.2%, however, at 13,883.08.
In European equities on Thursday, the CAC 40 in Paris climbed 0.9% and the DAX 40 in Frankfurt was 0.7% higher.
The pound rose to $1.2163 midday Thursday from $1.2125 at the time of the London equities close on Wednesday. The euro was largely flat at $1.0760, from $1.0758. Against the yen, the dollar faded to JP¥130.92 from JP¥132.57.
‘Even though any decrease in price pressure would be considered as good news, much of it has already been priced-in, and we don’t expect any significant and directional price action if today’s figure comes inside the 7.1% to 6.5% window. However, a number below 6.5% or above 7.1% should dramatically affect market sentiment, and could cause significant very short-term disturbances to FX and equity markets,’ ActivTrades analyst Pierre Veyret commented.
Core inflation, so excluding food and energy, will also be in focus. The yearly core inflation is expected to fall to 5.7% from 6.0%, according to consensus cited by FXStreet.
The CPI reading comes some three weeks before the first Federal Reserve meeting of the year on February 1.
Analysts at Deutsche Bank commented: ‘After a long run of inflation surprising on the upside, the latest releases have seen two downside surprises on CPI in a row for the first time since the pandemic, which has led to growing hopes that the Fed might achieve a soft landing after all. Furthermore, core inflation has also been increasingly subdued, with the most recent number for November showing monthly core inflation at a 15-month low. Those readings helped to bolster the case for the Fed to downshift their rate hikes last month, and if we did get a third downside surprise today, clearly that would add further fuel on market speculation about a Fed pivot later in the year.’
Ahead of the reading, US stock index futures were mixed. The Dow Jones Industrial Average was called to open up 0.1%, the S&P 500 flat, and the Nasdaq Composite down 0.1%.
Elsewhere in the central banking front, the Bank of England said it sold a portfolio of £19.3 billion worth of UK gilts it purchased in the autumn to keep a lid on bond market volatility following the UK government mini-budget. The ill-fated fiscal plan spooked investors and led to the departures of Kwasi Kwarteng as chancellor and Liz Truss as prime minister.
In London, a ’Super Thursday’ of retail sector updates grabbed investor attention.
AJ Bell analyst Russ Mould commented: ‘So far, it feels like retailers are doing better than feared - with some notable exceptions. How far you extrapolate this resilience depends on your view of whether households have already faced the worst of the impact of mounting bills and rising interest rates. However, with many people still to roll off cheap fixed-term mortgage deals and further increases in the energy price cap to come, there is certainly no room for complacency.’
Among those to star on Thursday was Asos. Shares in the online fashion retailer jumped 14%.
Its revenue for the four-month period to December 31, which it labels as P1, was £1.34 billion, down 4.1% from £1.39 billion a year ago. At constant currency, revenue fell 6%.
Its adjusted gross margin fell by 10 basis points to 42.9%, Asos said.
More promisingly, Asos said: ‘Actions taken on pricing and the reduced use of air freight drove an encouraging progression through the period relative to the prior year.’
Asos also drew attention to £300 mullion worth of profit-boosting measures it has identified for the current financial year. It hailed ‘significant progress’ in its ’driving change’ plan.
ProCook surged 9.8% after it reported improved third-quarter trading in the key Christmas period, the pots and pans seller defying the cost-of-living gloom.
For the third quarter ended January 8, revenue fell 2.5% year-on-year to £22.4 million. Excluding contributions from e-commerce channel Amazon, where it has discontinued sales, revenue improved 0.8%.
During the final four weeks of the quarter, ProCook said revenue improved 2.9% year-on-year, or 5.9% without Amazon.
Halfords stood out from an otherwise positive set of UK retail sector updates. The motoring and cycling products seller said third-quarter revenue grew but progress was stifled by subdued market conditions in its cycling and tyre-focused units. Revenue in the 13 weeks to December 30 jumped 22% on-year, 4.6% like-for-like.
In addition, Halfords lowered profit guidance and bemoaned a skills shortage in the UK. Shares slumped 19%.
Despite drawing attention to a UK housing market slowdown, Persimmon climbed 6.3%.
Persimmon said its forward sales position stood at £1.0 billion at the end of last year, down 36% from £1.6 billion at the end of 2021.
However, it reported 14,868 house completions in 2022, slightly up from 14,558 in 2021.
Third Bridge analyst Zainab Atiyyah commented: ‘Our experts expect Persimmon’s margins to decrease over the coming 18 months as they grapple with building material inflation, labour shortages, and greater difficulty in achieving planning permission. However, they should do better than most in the industry thanks to their land strategy and timber facilities.’
A barrel of Brent oil fetched $83.78 on Thursday afternoon London time, up from $81.43 late Wednesday. Gold traded at $1,885.37 an ounce, up from $1,872.57.
Still to come on Thursday, in addition to the US CPI report, is the latest US initial jobless claims at 1330 GMT.
By Eric Cunha, Alliance News news editor
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