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FTSE 100 Live: US inflation highest since 1981, UK economy posts surprise growth

·10-min read
FTSE 100 Live: US inflation highest since 1981, UK economy posts surprise growth

US inflation data soared past analyst expectations to hit 9.1% in June, the higest jump since 1981.

The UK economy performed better than expected in May after the Office for National Statistics today estimated growth of 0.5%.

The GDP improvement, which follows a contraction of 0.2% April, was fuelled by the expansion of the manufacturing and construction sectors and comes despite mounting cost of living pressures.

There was a further boost for the economy today, with the sight of Brent crude back at $100 a barrel after a steep 7% fall last night.

FTSE 100 Live Wednesday

  • UK grows by a surprise 0.5% in May

  • US inflation reaches 40-year high

  • FTSE 100 lower, shipping broker Clarkson surges

US stocks open lower on news of record inflation

14:38 , Simon Hunt

Stocks opened lower in New York on the news of US inflation hitting a 40-year high of 9.1%

The S&P was down 1.4% while the Nasdaq fell 1.7% in the first minutes of trading.

Tech firms were among the biggest losers, with security software business Crowdstrike dropping 5.9% and cloud computing firm Workday falling 5.3%.

The FTSE 100 fell 1.3%, led by a 5.3% drop by British Airways owner IAG, while investment business Abrdn droped 4.9% and Ocado dropped 3.7%.

Analysts react to ‘surprise’ US inflation data

14:17 , Simon Hunt

Market analysts have reacted to the ‘surprise’ news that US inflation has hit a 40-year high of 9.1%, raising concerns over potentially dire economic consequences continued inflation rises pose to the US.

Chris Beauchamp, Chief Market Analyst at trading platform IG Group, said: “US CPI has surprised on the upside once again, and stock markets and EUR/USD have taken it badly.

“The beat on core CPI will push expectations of the next Fed hike towards 100 basis points, and the breadth of the price increases...shows that CPI certainly doesn’t look like it’s about to drop back.

Richard Carter, head of fixed interest research at Quilter Cheviot, said: “This disappointment means that a 0.75% hike from the Federal Reserve at their next meeting is an absolute certainty and there may even be pressure from some quarters for them to do more.

“Central Banks are clearly struggling to get a handle on inflation and if this number continues to grow or hover around this level then more will be required to drive it down, regardless of the economic consequences this may have.

“Markets are likely to remain volatile on the back of this although the fall in the oil price in recent days does offer some hope that inflation pressures will begin to ease later in the year.”

Dollar surges after US inflation hits 40-year high

13:56 , Simon Hunt

The dollar surged in the aftermath of the announcement on anticipation of bigger and faster interest rate rises from the Fed over the coming months.

The Euro fell around half a cent to fall briefly below parity with the dollar. The pound shed a quarter of a cent to stand at $1.1880.

The FTSE100 fell 1.3%, led by a 5.3% drop by British Airways owner IAG, while investment business Abrdn droped 4.9% and Ocado dropped 3.7%.

The swap markets are now predicting a 1 in 3 chance of a full percentage point rise in interest rates by the US Federal Reserve when it meets later in July.

Soaring US inflation surpasses analyst forecasts to hit 9.1%

13:40 , Simon Hunt

US inflation data soared past analyst expectations to hit 9.1% in June according to figures just released by the US department of Labor Statistics.

Gasoline, shelter and food were among the largest contributers to the rise, which marked the highest annual gain since November 1981, and the highest monthly gain since 2005.

Nasdaq 100 futures dropped 2.3% on the news, led by falling tech stocks, while S&P futures fell 1.5%.

The announcement puts added pressure on the US Federal Reserve to hike interests rates when it meets later this month. The Fed is already expected to make a 75 basis point rise.

Page posts record month amid race for talent

13:09 , Simon Hunt

A RACE for talent in the City and the wider business world is leading to booming profits at recruitment house PageGroup, which enjoyed a record June.

Employers large and small are fighting to grab staff as the available workforce falls in size post-Covid. Many formerly working people have chosen to retire or rethink their lives.

Profit in the second quarter rose 25% to £281 million, thanks to rising pay levels and red-hot demand.

Half the growth came from the month of June, when the company made a profit of £100 million.

PageGroup’s CEO Steve Ingham said the company “continues to benefit from favourable trading conditions, including wage inflation and increased fee rates resulting from the high demand and short supply of candidates.”

PageGroup shares, down by a third this year, nudged up 4p to 434p today.

Wetherspoon shares down 7.6% as pubs recovery slower than hoped

12:50 , Simon Hunt

Pubs are recovering from the end of lockdown more slowly than hoped, JD Wetherspoon reported today as it headed for losses worse than the City expected.

Sales in the last quarter are down 0.4%, suggesting the budget pub chain has suffered from the cost-of-living issue as punters tighten their belts.

Chairman and founder Tim Martin, a sometime Tory donor, renewed his attack on the Government’s VAT plans which favour supermarkets, he argues.

J D Wetherspoon shares dropeed 7.6% in early trading.

Loungers back in profit as it opens 200th site

12:15 , Simon Hunt

Café and bar operator Loungers marked a return to profitability and saw record sales as the business ramped up its expansion plans and opened its 200th site.

Sales in the year to 17 April 2022 more than trebled to £237 million while the company posted pre-tax profits of £21.6 million.Nick Collins, Chief Executive Officer of Loungers, told the Standard: “We’ve very excited about the increase in the rate of openings -- we see a lot of opportunity for growth in greater London.“As a business we’re continuing to grow – with that comes the opportunity to mitigate the inflationary pressure.

Loungers shares went up 4.1% to 190p.

Clarkson upgrade boosts shares 9%, FTSE 100 lower

10:22 , Graeme Evans

A big profit upgrade by shipping broker Clarkson today boosted hopes that global trade is performing better than expected.

Investors tend to keep a close eye on Clarkson even if they do not own shares because 85% of world trade is carried by sea.

The FTSE 250-listed company, which has been around since 1852, brokers deals for the huge tankers that carry crude or for dry cargoes or iron ore or grain.

An unscheduled update today revealed that trading for 2022 is running well ahead of the company’s previous expectations, with the broking division performing particularly well.

First-half profits are set to be at least £42 million, an increase of more than 50% over the record of the previous year when surging freight rates and volumes reflected a trade rebound following the pandemic.

Clarkson shares today jumped 9% or 280p to 3235p, having fallen recently to their lowest level in more than a year as investors increasingly factored in a global recession.

Liberum analyst Gerald Khoo raised his earnings forecast for 2022 by 17% and upped his target share price by 100p to 4750p following the update.

He highlighted the strength of Clarkson’s business model, market leadership and global footprint, adding that signs of a long-awaited rebalancing of demand and supply in most shipping segments were now coming through.

Clarkson’s performance topped a largely resilient performance by the UK-focused FTSE 250 index, which harnessed today’s stronger-than-expected GDP figure to outperform the FTSE 100.

Other big risers in the second tier included Trainline and fast-fashion business ASOS, with gains of 5% and 3% respectively. The FTSE 250 index was down 0.4% or 74.28 points to 18,780.68, whereas the top flight lost more than 1% or 76.67 points to 7133.19.

The biggest blue-chip fallers came from the financial sector after declines of more than 2% for Abrdn and Prudential, while BP shares were 1% lower after last night’s sharp decline in the Brent crude price to $100 a barrel.

Retail-focused stocks were in demand after May’s surprise 0.5% GDP figure, led by Next and JD Sports Fashion at more than 1% higher.

FTSE 100 lower, retailers rally after GDP cheer

08:39 , Graeme Evans

The FTSE 100 index has weakened 42.55 points to 7167.31, with investors reluctant to take new positions ahead of this afternoon’s US inflation figure for June.

Financial stocks including Abrdn, Prudential and M&G were among the stocks under pressure at the top of the FTSE 100 fallers board. BP shares were also 1% lower after last night’s decline in the Brent crude price to $100 a barrel.

Retail-focused stocks received a confidence boost from today’s better-than-expected GDP figure for May. Next led the way with a gain of 2%, ahead of JD Sports Fashion, Howden Joinery and Primark owner Associated British Foods.

The domestic-focused FTSE 250 index also benefited, outperforming the top flight with a modest decline of 21.15 points to 18,833.81. The biggest riser was shipping services business Clarkson, whose shares lifted 7% after an upgrade to profit expectations.

Recession fears remain despite GDP surprise

08:24 , Graeme Evans

Today’s 0.5% bounce in GDP for May, following a disappointing figure in April, will ease concerns that the UK is on the brink of recession.

The services sector drove the turnaround, with a surge in GP appointments helping to offset the scaling back of Covid-19 Test and Trace and vaccination programmes. However, consumer-facing services saw output fall 0.1%.

Hargreaves Lansdown analyst Sophie Lund-Yates said: “While it’s positive to see a small nudge upwards in overall GDP, these figures are hardly shooting the lights out.

“It will take something strong to fully reverse fears that the UK is heading towards a recession in the coming year.

“Frankly, until there is a clear path out from political turmoil, the energy crisis, cost-of-living squeeze and the UK’s far-reaching productivity problems, it’s hard to see where the economy will find its take-off point.”

Brent crude at $100, US inflation in focus

07:57 , Graeme Evans

Brent crude’s decline to $100 a barrel today provided inflation respite on the day that the US consumer prices index is forecast to hit a new 40-year high at 8.8%.

June’s inflation reading is expected to be followed by another 0.75% rise in interest rates by the US Federal Reserve in two weeks’ time, although a lower number might weaken the case for a further similar increase by policymakers in September.

Hopes that price pressures are near their peak were boosted by last night’s significant fall in commodity prices, with global recession fears causing Brent crude to tumble 7%.

The fall to below $100 a barrel also reflected the potential demand impact of more lockdowns in major Chinese cities to curb the spread of a coronavirus subvariant.

Today’s US inflation figure is due at 1.30pm, with a number above 9% likely to put more upward pressure on the US dollar as investors factor in even steeper interest rate rises.

The dollar index held firm at a 20-year high against major currencies today, with the greenback at parity with the euro and a two-year high versus the pound.

Elsewhere this afternoon, the Bank of Canada is due to hike rates by 0.75%, having increased by 0.5% to 1.5% at its previous meeting.

With investors on the sidelines ahead of the US inflation figure, the FTSE 100 index is forecast to open 12 points lower at 7198.

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