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US inflation relief prompts cautious optimism in European markets

·3-min read

The FTSE 100 finished another day in the green as lower-than-expected US inflation figures signalled relief for Americans and promised less pressure on wallets.

US core inflation rose 5.9% in July, behind forecasts and following a reported decline in energy and fuel prices.

In the City, shares in insurers Aviva and Admiral both lurched forward with Aviva planning to return more money to shareholders and Admiral announcing a special dividend payment in its half-year results.

The FTSE 100 finished on Wednesday 18.96 points higher, or 0.25%, at 7,505.11.

“US markets have basked in the glow of a welcome decline in headline inflation, with optimists hoping that this could mark the beginning of a downward journey for prices”, Joshua Mahony, senior market analyst at online trading platform IG, said.

“While we have seen upside across European indices, the FTSE 100 has lagged thanks to a reversal for (the pound against the dollar) that serves to hold back an index which has around two-thirds of its revenues earned in foreign currencies.”

The S&P 500 index was up by 1.96% and Dow Jones rose 1.56% when European markets closed, as American traders cashed in on the improved economic mood.

European markets also edged higher despite pressing concerns over energy supplies, following reports on Tuesday that Russian oil flows to parts of Central Europe would be cut off.

The Cac 40 lifted by 0.71% and the Dax was up by 1.31% at close.

In company news, shares in holiday group Tui lifted despite travel disruption leading to a £63 million hit to its profits in the third quarter.

Although a rebound in travel demand meant losses narrowed significantly from the £566 million underlying loss suffered a year earlier.

Shares in Tui were 1.95p higher at 145.35p at market close.

Meanwhile, cash-strapped consumers cutting back on takeaway orders widened pre-tax losses for food delivery giant Deliveroo, as it revealed Next boss Lord Simon Wolfson had quit its board.

The group posted a pre-tax loss of £147.3 million for the first half of 2022, against losses of £95.4 million a year earlier, after sales growth declined.

Nevertheless, traders remained optimistic about the outlook of Deliveroo and shares jumped 6.76p to 98p on the London Stock Exchange at closing.

Meanwhile, insurer Prudential reported an 8% rise in its half-year adjusted operating profits but warned that ongoing Covid-19 restrictions have dampened sales in Hong Kong and will pose challenges during the rest of the year.

Shares in the insurance giant edged up slightly, up 5p to 994.2p at the end of the day.

The biggest risers on the FTSE 100 were Admiral Group, up 248.5p to 2,216p, Aviva, up 50.6p to 464.9p, Ocado, up 57.6p to 925p, Abrdn, up 10.2p to 171.35p, and Flutter, up 542p to 9,156p.

The biggest fallers on the FTSE 100 were Haleon, down 24.5p to 279.5p, GSK, down 90.2p to 1,556.6p, Centrica, down 4.6p to 79.52p, SSE, down 43p to 1,767p, and HSBC, down 8.5p to 545p.