London close: Stocks higher as US inflation comes in cooler

(Sharecast News) - London markets closed in the green on Wednesday, after fresh data from across the pond showed consumer inflation in the United States falling back more than expected in March. The FTSE 100 ended the day up 0.5% at 7,824.84, while the FTSE 250 rose 0.25% to close at 19,002.73.

Sterling meanwhile saw a mixed performance, last rising 0.43% on the dollar to trade at $1.2478, while it weakened 0.3% against the euro to change hands at €1.1351.

"Stock markets rallied on Wednesday ahead of the US March CPI release, which came in lower than expected at 0.1% month-on-month and 5% year-on-year," said IG senior market analyst Axel Rudolph.

"US indices also rallied straight after the inflation report, but rapidly gave back all of their gains as core inflation, excluding food and energy, came in as expected at 5.6% year-on-year, versus 5.5% in February.

"They then made back some of their earlier gains ahead of the release of the FOMC minutes for the March meeting."

UK house sales rebound, US inflation cooler than expected

In economic news, UK home sales rebounded close to pre-Covid levels in March, driven by the demand for flats and a recovery from the market slump last September caused by the disastrous mini-budget of then-prime minister Liz Truss.

According to a survey by property marketing platform Rightmove, the number of sales agreed between sellers and buyers was just 1% lower than in March 2019.

The previous decline in sales was attributed to the market turmoil and thousands of mortgage offers being pulled by lenders following Truss' £44bn plan of unfunded tax cuts.

However, loan costs had since fallen, leading to the current recovery.

"The market has been recovering since the turmoil around the mini-budget last year which sent mortgage rates temporarily sharply higher," said Victoria Scholar, head of investment at Interactive Investor.

"Reduced asking prices have helped to generate a pickup in sales, with particular strength in the British capital thanks to strong demand from workers and overseas buyers for London apartments.

"With the housing market likely to cool further this year, and the Bank of England nearing the peak of the rate hiking cycle, we could see more buyers return to the market, as the recent headwinds which have stymied transactional activity subside."

Across the Atlantic, the cost of living in the US fell back more than expected last month, according to the US Department of Labor.

The country's consumer price index (CPI) increased at a seasonally-adjusted month-on-month rate of 0.1% in March, lower than the consensus estimate of 0.2%.

On a year-on-year basis, the rate of gain dropped to 5.0%, compared to consensus expectations for 5.1%.

The CPI at the core level increased by 0.4% over the month, meeting the expected figure, while the core CPI in year-on-year terms ticked higher by one-tenth of a percentage point in comparison to February, reaching 5.6%.

Food price inflation remained unchanged, while energy costs dropped by 3.5%, and used car and truck prices dipped 0.9%.

Still stateside, US mortgage applications rose 5.3% in the week ended 31 March, according to the Mortgage Bankers Association of America.

That was a rebound from the prior week's 4.1% drop, with applications to purchase a home surging by 7.8%, while those to refinance rose just 0.1%.

Additionally, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell ten basis points to 6.3%, marking the fifth consecutive weekly decline and the lowest level since early February.

Finally in economic headlines, the Bank of Canada left the interest rates unchanged at 4.5% on Wednesday, as expected, and upgraded its growth forecast for the year.

The Bank said it expected consumer price inflation to fall quickly to around 3% in the middle of the year, and then decline more gradually to its 2% target by the end of 2024.

Unite Group and property plays rise, De La Rue crumbles

On London's equity markets, student accommodation provider Unite Group rose 1.3% by the end of trading, after reporting that it had already sold 90% of its rooms for the 2023-2024 academic year, reflecting strong demand as well as new nomination agreements with universities.

Mining giant Glencore also performed well, with its shares up 2.4% after it sweetened its offer for Canada's Teck Resources on Tuesday, by proposing to add a cash element.

Property stocks also gained, with Great Portland Estates seeing a 1.75% rise and Hammerson managing gains of 0.3%, after the former reported a "record leasing year" driven by demand for its "high quality spaces".

Tritax EuroBox was also in positive territory, growing 2.87%.

On the downside, Petrofac slid 13.21% after warning of a wider full-year loss following a review of its portfolio, while Tullow Oil dropped 6% after being downgraded to 'underperform' by Jefferies.

International Consolidated Airlines Group (IAG), the owner of British Airways and Iberia, was down 4.03% on the back of a profit warning from American Airlines.

Flutter Entertainment was 2.79% weaker after reports that Fastball placed 2.2 million shares in the company at £149.50, with Goldman Sachs as the bookrunner.

Elsewhere, supermarket giant Tesco slipped 0.11% ahead of its full-year results on Thursday.

Finally, banknote printer De La Rue tumbled 19% after warning on profits and saying it had started talks with lenders after demand for banknotes fell to its lowest level in more than 20 years.

Reporting by Josh White for Sharecast.com.