FTSE 100 heads higher and Wall Street recovers despite US inflation jumping by more than expected

• FTSE 100 up 36 points
• Informa in demand on buyback plan
• RELX drops after update

3.40pm: Footsie back at two year high after brief dip

Leading shares are looking to close at another two year high, but for a while it did not look like that.

The stronger than expected US inflation figures sent Wall Street sharply lower and pushed the FTSE 100 briefly into the red after it had spent most of the day in positive territory.

But with US markets recovering, so did the UK blue chip index.

It is currently up 36.40 points or 0.48% at 7679.82 and set for its best level since January 2020.

 Michael Hewson, chief market analyst at CMC Markets UK, said: « It’s been quite a choppy session for markets in Europe today with the FTSE 100 making another 2 year high, however the afternoon session did see us undergo a sharp pullback after US CPI surged to a new 40 year high of 7.5%, and US markets opened lower.

« The UK benchmark continues to look resilient despite the early weakness in the US, with the DAX also managing to hold up reasonably well, against a backdrop of increasing inflation risk. »

A number of companies unveiled share buyback plans, with mixed results.

Informa PLC (LSE:INF) is up 7.36% as it sold its Pharma Intelligence business to private equity group Warburg Pincus for £1.9bn, and launched a buyback programme worth an inital £100mlm.

But RELX PLC (LSE:REL) got little thanks for its proposals to boost shareholder value, falling 2.92% as it update disappointed.

Meanwhile AstraZeneca PLC (LSE:AZN) added 4.72% as it recorded record quarterly revenue of US$12bn in the last three months of the year, a better than expected figure which was helped by sales of its COVID-19 vaccine.

3.05pm: US markets recover from worst levels

US markets are indeed in the red after the higher than expected inflation figures had analysts scrambling to raise their expectations for the number of rate rises this year.

But they are off their early slump, with the Dow Jones Industrial Average down 0.17% or 62.28 points at 35,705.78 after falling as low as 35,479.

The S&P 500 is off 0.28% and the tech heavy Nasdaq Composite is 0.42% lower

And even though the US is still in negative territory, that recovery from the worst has helped pull the FTSE 100 back into the green.

The UK blue chip index is now up 28.77 points or 0.38% at 7672.19.

2.25pm: US market fall accelerates

The slide on Wall Street is getting worse.

The Dow Jones Industrial Average is now set to open 0.75% lower, the S&P 500 down 1.38% and the Nasdaq Composite – full of tech companies who will be affected by higher interest rates – is off 1.97%.

Unsurprisingly the UK market has suffered some fallout. The FTSE 100 is now down 6.8 points at 7636.62 having earlier hit a new two year high of 7679.

1.55pm: Federal Reserve « behind the curve » on inflation

On US interest rates, Victoria Scholar, head of investment at interactive investor said, “US January consumer prices rose by 7.5%, topping analysts’ expectations for 7.3% year-on-year, hitting the highest level since February 1982, driven by rising energy costs, labour shortages and problems with the global supply chain.

« Some analysts believed that inflation had already peaked but today’s month-on-month data, rising 0.6% versus consensus 0.4% suggests there was more to go before inflation starts to ease back

 » It looks as though the Fed could be in for around six rate hikes this year, with lift-off in March. Given the tightness of the labour market and strength of the underlying economy, the Fed is already behind the curve on inflation

« However the big question is to what to extent the Fed’s limited demand-side focused tools will be able to target the supply side pressures from energy and labour. Some of these supply side pressures however are starting to ease off already with an improvement in the global supply chain bottlenecks as we emerge from the pandemic and as workers return to the labour force, capping some of the wage pressures brought about by labour shortages.”

1.51pm: Wall Street in the red after inflation data

All three main US indices are now in the red following the inflation numbers.

The Dow Jones Industrial Average is set to fall by 0.41%, the S&P 500 by 0.85% and the Nasdaq Composite by 1.37%.

Meanwhile the FTSE 100 is virtually flat, up just 1.42 points at 7644.84.

Not so long ago, the Federal Reserve was expected to lift rates perhaps as much as two or three times this year.

Now some are suggesting six hikes, with a 100 basis point increase by July.

US RATE FUTURES SHOW NEARLY 6 HIKES IN 2022 AFTER THE JANUARY CPI DATA – FEDWATCH.

— Breaking.Live (@BreakingLive_) February 10, 2022

1.34pm: Consumer price index hits new 40 year high

US inflation rose by more than expected in January, according to the latest figures from the Bureau of Labor Statistics.

The consumer price index climbed 7.5% over the last twelve months, its biggest year-on-year increase since February 1982.

That compares to 7% in December, itself the biggest rise since June 1982.

Analysts had been expecting a figure of 7.2% to 7.3%.

Core inflation, excluding volatile food and energy prices, also came in higher than anticipated at an annualised 6%.

US CPI (M/M) Jan: 0.6% (est 0.4%; prevR 0.6%)

– CPI (Y/Y) Jan: 7.5% (est 7.3%; prev 7.0%)

– Core CPI (M/M) Jan: 0.6% (est 0.5%; prev 0.6%)

– Core CPI (Y/Y) Jan: 6.0% (est 5.9%; prev 5.5%)

— LiveSquawk (@LiveSquawk) February 10, 2022

Meanwhile US weekly jobs claims were better than forecast.

The number of Americans claiming unemployment benefit for the first time was 223,000 last week, compared to expectations of a figure of 230,000.

That compares to 239,000 the previous week, revised up by 1,000.

The inflation figures give more credence to the argument the Federal Reserve will increase interest rates by 50 basis points next month.

12.25pm: Mid-cap index ahead but underperforming Footsie

Like the FTSE 100, the mid-cap index is also in the green, but to a lesser degree.

The leading index is up 0.26% while the FTSE 250 has added 0.17% to 22,222.

Cineworld Group PLC (LSE:CINE) is leading the way, up 4.48% in the wake of the government endingCOVID-19 restrictions a month early.

Holiday group TUI AG (LSE:TUI) is also benefiting, up 4.1%, as is Wizz Air Holdings PLC (AIM:WIZZ), climbing 3.46%.

Darktrace PLC (LSE:DARK), not long demoted from the blue chip index, is up 4.32% after it announced a multinational electronics corporation had signed a million-dollar deal to ensure its business was protected from sophisticated and fast-moving cyber-attacks. 

11.52am: US investors await consumer price data

US stocks are expected to make a mixed start as investors await inflation data, due for release before the start of trade, that is likely to show consumer price increases remain at multi-decade highs. 

Futures for the Dow Jones Industrial Average rose 0.19% in Thursday pre-market trading, but those for the broader S&P 500 index shed 0.09% and the tech-heavy Nasdaq 100 declined 0.28%.

Markets closed higher on Wednesday, led by gains on the Nasdaq, as investors responded positively to corporate earnings reports. Disney jumped nearly 7% after hours as it added nearly 12 million new quarterly subscribers at Disney+, beating market expectations.  

The Nasdaq Composite closed 2.08% up at 14,490, while the S&P 500 gained 1.45% to 4,587 and the Dow Jones Average added 0.86% to 35,768.

US consumer price data are expected to show that prices climbed 7.2% year-over-year in January, up from 7% in the previous month, which was the biggest year-on-year increase since June 1982.  

“The pre-CPI rally in the US stocks suggests that the hawkish Federal Reserve (Fed) expectations have been broadly priced in and that the perception that the worst reaction to the Fed rate hikes is mostly done,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

“But there is a risk that investor optimism is premature… as there is still room for Fed hawks to price in a tighter Fed policy…

“Either we will see a reasonable CPI read and the equity rally could carry on, or we will see an ugly number, and the bears will run into the marketplace and destroy the recent gains. » 

11.33am: The man from the Pru to step down

Prudential PLC (LSE:PRU) chief executive Mike Wells plans to leave his role next month, with the insurer saying its next top boss will be based in Asia where its main businesses are now based.

Wells oversaw two key demergers, first of its UK and European M&G business and then splitting off its American operations after pressure from activist investors.

Shriti Vadera, chair of Prudential, said: « Given Prudential’s focus on the growth markets of Asia and Africa, the board has decided with this managed transition of the leadership structure, that the roles of the group CEO and the group CFO will be based in Asia, where Prudential’s largest businesses, the group regulator and the rest of the senior management team are located. »

Prudential shares have edged up 0.28%.

Meanwhile the FTSE 100 is up 20.77 points or 0.27% at 7664.19.

10.35am: Firms struggling with importing, says ONS – but no shortage of beer

A net 6% of firms reported a fall in turnover in December, the largest decrease since April 2020, according to the latest snapshot of economic activity from the Office for National Statistics.

Meanwhile nearly three-quarters (72%) of currently trading importing businesses with 10 or more employees reported they had experienced a challenge importing in the last month.

For exporting this figure was 67% 

On the bright side, the seven-day average estimate of UK seated diners increased by 6 percentage points in the week to 7 February 2022 to 112% of the level in the equivalent week of 2020.

Finally, you could get drunk but might struggle to deal with the next day’s headache.

Shelf availability of items between 4 and 7 February 2022 was lowest for paracetamol, with 19% of these items marked as « none » or « low ».

But shelf availability was highest for beer, with 74% of this item recorded as « high »

10.13am: Barratt boosted by broker upgrade

Housebuilder Barratt Developments PLC (LSE:BDEV) is 1.36% better at 642p after a buy note from Deutsche Bank following this week’s results.

Analyst Jon Bell raised his price target from 832p to 862p and said: « Barratt continues its impeccable delivery with strong first half  margins, a full year volume guidance raise and the introduction of progressively lower dividend cover.

« With the ink barely dry on its recent acquisition of Gladman – the benefits of which extend to the medium term – this is a demonstrable display of confidence. »

9.41am: Informa leads the way on disposal and buyback news

It’s a day of share buybacks, and while Unilever and RELX have failed to enthuse the market despite their plans to boost shareholder value, it is a different story for Informa PLC (LSE:INF).

The information and events group is the biggest riser in the leading index, up 5.79% after it said full year results would be in line with expectations, with revenues of £1.8bn and adjusted operating profits of £375mmln.

It has also agreed to sell Pharma Intelligence, its clinical trial and regulatory data specialist, to private equity group Warburg Pincus for £1.9bn, and is launching a buyback programme worth an inital £100mlm.

Overall the FTSE 100 is now up 12.31 points at 7655.73.

Russ Mould, investment director at AJ Bell, said: « “Better than expected results from AstraZeneca and another good showing from the miners helped to prop up the FTSE 100 but disappointment over results from Unilever and Relx meant that the UK index struggled to make much headway. »

8.52am: Market turns more cautious

The initial enthusiasm has waned a little.

The FTSE 100 is now up just 4.3 points at 7647.72, as investors await the key US inflation reading.

While the market has seemingly come to terms with higher interest rates to deal with the growing pricing pressures, helped by some positive company results, a strong US figure could put the cat among the pigeons again.

Craig Erlam, senior market analyst at OANDA, said: « Today’s consumer price index from the US is what we’ve all been waiting for this week. Fed policymakers have continued to stress their flexibility on interest rates this year, with Loretta Mester claiming that each meeting will be in play, as many now assume to be the case. Although one hike each quarter still looks like the most likely outcome.

« Of course, that depends on inflation not spiraling out of control, forcing the Fed to be more aggressive. The CPI data is expected to show prices rose 7.3% in January compared to a year ago, almost four times the Fed’s target. Another reading above here could spook the markets once more, which may explain the cautious advance we’re seeing so far today. »

8.20am: New two year peak for Footsie

Leading shares are heading higher again, hitting a new two year peak.

On a busy day for company news and ahead of the key US inflation figures later, the FTSE 100 is up 30.37 points or 0.4% to 7673.79.

AstraZeneca PLC (LSE:AZN) has added 3.63% as it recorded record quarterly revenue of US$12bn in the last three months of the year, a better than expected figure which was helped by sales of its COVID-19 vaccine.

It raised its dividend for the first time in around ten years.

But Unilever PLC (LSE:ULVR) is down 3.11% after warning profit margins would fall this year due to rising costs.

It said fourth quarter sales rose 4.9% and announced a €3bn share buyback in the wake of its failed attempt to buy GlaxoSmithKline’s consumer products business.

Information provider RELX PLC (LSE:REL) fell 2.86% despite launching its own buyback of £500mln, with its update disappointing even though it reported a strong end to the year.

But Steve Clayton, fund manager at HL Select, said: “The market may feel that the company has simply matched but not beaten forecasts, but when you consider the increasing margin pressures being felt elsewhere, especially in non-digital businesses, Relx looks well set.”

6.50am: Market’s positive mood set to continue

FTSE 100 forecasts were edging up before trading got underway ahead of another big news day.

Financial spread betters had the index up by around seven points some two hours before the open with the mood helped by the tech rally continuing overnight on Wall Street.

US tech stocks shot up again helped by solid growth in subscriber numbers for Disney’s streaming arm Disney+ suggesting the disappointing Netflix performance recently might be company-specific and not a general trend.

Nasdaq was up over 2% which should bode well for the UK’s FTSE 100 tech proxy Scottish Mortgage Trust.

US inflation numbers are the big event in the afternoon, with this set the last before the Federal Reserve’s next meeting when it is expected to follow the Bank of England and start raising interest rates.

After the previous month’s jump in US consumer prices to 7%, the hope this time is for signs of the pressure easing even if the number edges higher again.

« Consensus expects an uptick in headline figure from 7.0% in December to 7.2% year on year in January and in core from 5.5% to 5.9%, » said Danske Bank.

« We think another higher-than-anticipated print would raise the likelihood of a 50 basis point (0.5%) hike in March, although our base case remains for a 25 basis point (0.25%) hike. »

UK company news today is focused around pharma giant AstraZeneca, with its COVID-19 vaccine again likely to be the focus especially now it is starting to charge for it.

Top-line growth will also be key for Unilever, where management is under some pressure after last month’s botched attempt to buy Glaxo’s consumer arm.

Consensus forecasts are for Thursday’s full-year numbers to show sales of €52bn, a 4% rise on an underlying basis with operating profits on a similar basis of around €9.5bn.

6.50am: Early Markets – Asia / Australia

Asian markets were mixed on Thursday as the Reserve Bank of India’s governor announced that the repo rate will remain unchanged at 4%.

The repo rate is the rate at which the central bank lends to commercial banks.

Japan’s Nikkei advanced 0.42% to 27,696 and South Korea’s Kospi rose 0.21% to 2775.

The Shanghai Composite in China fell 0.15% to 3,475 while Hong Kong’s Hang Seng slipped 0.19% to 24,782.

Australia’s S&P/ASX200 closed 0.3% higher as falls in the healthcare, energy, and industrials sectors were offset by gains among the resources and tech stocks.

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