London close: Stocks surge as US inflation comes in cooler

(Sharecast News) - London stocks closed above the waterline on Thursday, as investors digested some weaker-than-expected consumer inflation data from across the pond. The FTSE 100 ended the session up 1.08% at 7,375.34, and the FTSE 250 added 3.9% to 19,377.24.

Sterling was also in the green, and was last up 2.65% on the dollar at $1.1659, as it strengthened 1.17% against the euro to trade at JPY 1.1479.

"European markets spent most of the day trading cautiously until this afternoon's US CPI numbers for October unexpectedly came in well below expectations, falling to its lowest level since January," said CMC Markets chief market analyst Michael Hewson.

"The market reaction to the sharply lower inflation number was instant and sharp, as equity and bond markets both rallied hard, with bond yields falling sharply.

"If you're of the mind that falling inflation will temper the size of future rate rises from the Federal Reserve, then this report is for you and markets are reacting on that basis, with bond yields falling sharply in anticipation of a slower pace of Fed rate rises."

Hewson said the only word of caution was that the CPI reading was "but one number", albeit an encouraging one, raising the prospect that central banks might not have to go as hard on inflation as initially feared, meaning rates may peak at a much lower level.

"Now we need to see further evidence in subsequent data for this rebound to stick."

In economic news, the cost of living in the US grew by less than expected last month, with the Department of Labor reporting that the annual rate of increase in consumer prices declined to 7.7% in October from 8.2% for September.

At the core level, the consumer price index (CPI) slipped to 6.3% from 6.7%.

Economists had forecast increases in the year-on-year rate for headline and core CPI of 8.0% and 6.6%, respectively.

In month-on-month terms, headline CPI was ahead by 0.4%, and by 0.3% at the core level, which excludes volatile food and energy prices.

Dragging on headline CPI, prices for energy services slipped by 1.2% over the month.

"We have learned over the past 18 months or so that one good core CPI print proves nothing, but we see good reasons to think this one is the real deal, given the downward pressure in the pipeline," said Ian Shepherdson at Pantheon Macroeconomics.

"We expect another decent core print in November - the data are published a couple of days before the December Federal Reserve meeting - giving the Fed scope to hike by only 25-basis points, provided the employment/wages numbers are on the soft side too.

"But that's not a crazy bet - for what it's worth, we think any further rate hikes are a mistake, and we see little chance that the terminal rate will be as high as 5%."

Staying stateside, first-time jobless claims rose by 7,000 in the week ended 5 November, according to the Labor Department, with the advance figure for seasonally-adjusted initial claims hitting 225,000.

The previous week's level was revised up by 1,000 to 218,000, while the four-week moving average dropped by 250 to 218,750.

According to the same report, the advance seasonally adjusted insured unemployment rate came to 1.0% for the week ended 29 October, unchanged from the previous week's rate.

On home shores, UK consumer confidence fell in October to its lowest level since April 2020.

The YouGov-Centre for Economics and Business Research (CEBR) consumer confidence index declined to 94.7 from 97.7 in September, falling for the third month in a row and marking the fourth-lowest score in the index's 10-year history.

Against a backdrop of rising interest rates and more expensive mortgages, the index for confidence in house prices over the last 30 days slumped to 115.4 in October from 124.8 the month before, while the index for the outlook over the next 12 months dropped to 109.1 from 120.4.

But pessimism over household finances was the biggest contributor to the overall decline in the confidence index.

The gauge for the outlook for finances over the next 12 months improved to 45.5 from 43.0, but that remained the worst score in the overall index by some distance and marked the 14th consecutive month the score was negative.

Specifically, the index for the outlook for household finances over the past 30 days fell to 55.8 from 56.6, making for the second-worst score for the measure - which had never seen a net positive score - on record.

Elsewhere, the UK housing market weakened further last month, as demand tumbled and house price growth came to a halt.

According to the latest RICS residential market survey, new buyer enquiries fell for a sixth successive month in October, to -55 from -36 in September.

It was the lowest reading since the 2008 financial crisis after spring 2020, when the housing market was halted during the first Covid-19 lockdown.

House prices also came under pressure, with the national net balance sliding to -2 from 30 a month previously, ending a 28-month run of positive readings.

"The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

"As a result, the volume of activity is likely to slip back over the coming months, and realistic pricing is now much more important to complete a sale.

"The settling down in financial market could provide some relief, although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon."

Finally on data, bank lending in mainland China plumbed its lowest level in five years last month according to data released earlier, amid ongoing Covid-19 restrictions and a slump in mortgage demand.

According to the People's Bank of China , lending fell to CNY 615bn (£74.6bn) in October, down from CNY 2.5trn during the prior month, and the lowest since December 2017.

Medium- to long-term loans to households plummeted to CNY 33bn from CNY 347bn in the month before.

Short-term loans, meanwhile, fell by CNY 51bn at the same time.

On London's equity markets, B&M European Value Retail slid 4.52% after the discount retailer reiterated its earnings guidance for the year, and posted a rise in interim revenues but a drop in profit.

Haleon fell 2.32% even after the former consumer health arm of GSK reported a 16.1% increase in third-quarter revenue, driven by higher prices, and forecast organic sales growth of 8% to 8.5%.

Defence technology specialist QinetiQ Group fell 2.49% despite lifting its full-year guidance after a spike in first-half revenues and profits.

Underlying revenues for the six months to 30 September jumped 12% to £673.4m, while operating profits rose to £74.1m from £53.4m a year previously.

Orders, meanwhile, jumped 18% to £798.8m.

On the upside, Centrica jumped 7.37% after the British Gas owner announced a share buyback programme and lifted guidance for full-year earnings.

Auto Trader Group reversed earlier losses to close up 3.07%, after it reported a slight fall in half-year profits following a rise in costs associated with its takeover of car leasing website Autorama, but posted a 16% rise in revenues.

AstraZeneca advanced 2.88% after bumping up its full-year earnings guidance following a solid third quarter.

Building materials distributor and DIY merchant Grafton Group leapt 11.54% after it announced another share buyback programme, as it backed its expectations for full-year operating profit and posted a jump in revenue.

Transact owner IntegraFin gained 10.77% after saying it was performing "well" and upgrading its full-year profit guidance.

WH Smith rallied 5.13% after the book and stationery retailer said it swung to an annual profit as a rebound in air and rail travel boosted revenues, with that momentum continuing into the new fiscal year.

ConvaTec Group advanced 8.97% after the medical products maker upgraded its full-year guidance, as it reported group revenues had grown 2.4% on a reported basis over the 10 months ended 31 October.

In broker note action, Aston Martin Lagonda was boosted 4.9% by an initiation at 'overweight' at Barclays, while St. James's Place was boosted 7.45% by an upgrade to 'outperform' at KBW.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,375.34 1.08% FTSE 250 (MCX) 19,377.24 3.90% techMARK (TASX) 4,399.79 1.80%

FTSE 100 - Risers

Convatec Group (CTEC) 231.00p 8.97% SEGRO (SGRO) 857.80p 8.45% JD Sports Fashion (JD.) 116.35p 8.28% Intermediate Capital Group (ICP) 1,230.50p 8.22% Schroders (SDR) 451.00p 8.08% Hargreaves Lansdown (HL.) 891.40p 7.55% Persimmon (PSN) 1,378.00p 7.53% St James's Place (STJ) 1,153.50p 7.45% Centrica (CNA) 83.30p 7.37% Ashtead Group (AHT) 5,178.00p 7.16%

FTSE 100 - Fallers

B&M European Value Retail S.A. (DI) (BME) 357.20p -4.52% Rolls-Royce Holdings (RR.) 85.96p -3.00% BAE Systems (BA.) 777.00p -2.95% Shell (SHEL) 2,315.00p -2.87% Imperial Brands (IMB) 2,093.00p -2.79% Sainsbury (J) (SBRY) 212.80p -2.56% BP (BP.) 470.75p -2.35% Haleon (HLN) 279.60p -2.32% British American Tobacco (BATS) 3,316.50p -2.24% Harbour Energy (HBR) 368.10p -2.13%

FTSE 250 - Risers

Grafton Group Ut (CDI) (GFTU) 810.80p 11.54% IntegraFin Holding (IHP) 300.40p 10.77% Kainos Group (KNOS) 1,390.00p 10.76% Currys (CURY) 78.10p 10.16% Molten Ventures (GROW) 415.40p 9.95% Synthomer (SYNT) 143.20p 9.56% Bridgepoint Group (Reg S) (BPT) 241.40p 9.13% HGCapital Trust (HGT) 370.00p 8.98% Future (FUTR) 1,497.00p 8.64% Moonpig Group (MOON) 162.90p 8.60%

FTSE 250 - Fallers

Wood Group (John) (WG.) 150.50p -3.03% FirstGroup (FGP) 93.55p -2.86% QinetiQ Group (QQ.) 352.80p -2.49% ContourGlobal (GLO) 250.00p -1.57% Vietnam Enterprise Investments (DI) (VEIL) 540.00p -0.92% VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 400.50p -0.87% Templeton Emerging Markets Inv Trust (TEM) 139.40p -0.85% Schroder Oriental Income Fund Ltd. (SOI) 248.00p -0.80% Petrofac Ltd. (PFC) 113.70p -0.70% Elementis (ELM) 102.50p -0.68%