FTSE 100 closes back above 7,200 as US blue-chips advance after benign US CPI

  • FTSE 100 ends 59 points higher
  • Dow Jones gains over 150 points
  • US CPI up 0.5% in July, down from 0.9% June increase

4.55pm: New peaks after benign US CPI

The FTSE 100 index was strong on Wednesday, ending above the 7,200 level as US blue chips advanced on the back of benign US inflation data.

At the close, the UK blue-chip index was 59.10 points or 0.8% firmer at 7,220.14, the session high and an 18-month peak, well above the day’s low of 7,157.74

On Wall Street, around London’s close, the Dow Jones Industrials Average was 155 points, or 0.4% higher at 35,419 having hit fresh record levels early on. But the broader S&P 500 was only up 0.1%, drifting back from its own new high, while the tech-laden Nasdaq Composite shed 0.6%.

Craig Erlam, senior market analyst at OANDA Europe commented: “Stock markets are making decent gains on Wednesday, buoyed by the latest inflation data from the US which eased in July. While I don’t think a small decline is a game-changer, as far as monetary policy is concerned, it may have been had we continued to see an acceleration, or evidence of more worrying price pressures. Instead, we can all breathe a little easier, albeit safe in the knowledge that tapering is still coming and it’s likely to be announced next month.

“Easing price pressures, an economy that’s recovering strongly and a labour market that’s rapidly improving will be music to the ears of Fed policymakers. While it may not change the start date, or even pace, of tapering given their view that inflation was transitory, it will give them an additional degree of comfort and allow them to take their foot off the gas should it be required.”

Erlam added: “US yields softened in response to the CPI data, although we’re already seeing the 10-year recouping most of those losses since the opening bell on Wall Street. That may be a sign that traders agree it was no game changer, or that the initial move was over the top, but the important thing is that the pressure is off, for now.

“The dollar also eased off in the aftermath of the release, although it hasn’t been so fortunate in reversing those losses at the time of writing. It’s been on a fantastic run the last week or so, with a combination of strong data and hawkish Fed speak driving the gains. It has been losing momentum going into the release though so may be seeing some profit taking.”

3.20pm: Oil call

US government officials are calling on the Organisation of Petroleum Exporting Countries (OPEC) and their associates, known collectively as OPEC+, to increase oil production in a bid to bring down energy prices.

In a statement, National Security Advisor Jake Sullivan called on the cartel to pump more oil to avoid jeopardising the global economic recovery from COVID-19, although the move may draw criticism and allegations of hypocrisy from environmentalists following the latest IPCC report blaming continued fossil fuel extraction for the worsening climate crisis ahead of crucial talks in Glasgow later this year.

OPEC+, which includes major exporters including Saudi Arabia, Iran and Russia, did agree to increase production by around 400,000 barrels per day in July, this is still well below levels seen before the pandemic and has done little to bring down prices of Brent crude, which have risen around 36% so far this year to around US$70 a barrel, higher than they were at the start of the pandemic.

The high crude prices are, in turn, pushing up petrol prices across the world as economies reopen and fuel demand begins to return, increasing the pressure on supply. US gas prices have risen by around US$1 per gallon since last year, while UK petrol prices hit an eight-year high in July at 3.4p per litre.

Back in the equities markets, the FTSE 100 was up 50 points at 7,211 at around 3.20pm, putting it on track to close at its highest level in 18 months.

2.40pm: Wall Street opens higher

The main indices on Wall Street started Wednesday on the front foot as the latest inflation figures, while elevated, were in line with what the market expected.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.37% at 35,395 while the S&P 500 climbed 0.25% to 4,447 and the Nasdaq rose 0.29% to 14,831.

Back in London, the FTSE 100 was attempting to push higher and follow Wall Street’s lead, rising 40 points to 7,201 at around 2.35pm.

2.05pm: US inflation remains elevated in July

US price inflation slowed in July but still remained near historic highs as supply chain disruptions continued and economic reopening caused a rise in demand for travel services.

The consumer price index (CPI) rose 0.5% in July, down from the 0.9% increase in June, while the core CPI rose 4.3% year-on-year compared to 4.5% the month before.

Despite the slowdown in the rate of inflation, the rate of price increases is still elevated and is predicted to remain so into next year.

The swift economic rebound following the reopening on most parts of the US economy has contributed to inflationary pressure in recent months, while a shortage of semiconductors has driven up prices of used cars, contributing to the increase.

The data will be closely eyed by the Federal Reserve as it continues to mull its options to taper its stimulus programme that has pumped trillions of dollars into the economy during the pandemic.

Back in London, the FTSE 100 had inched higher into mid-afternoon and was up 40 points at 7,200 at around 2pm.

12.40pm: US markets set for negative start

US stocks are expected to beat a retreat on Wednesday ahead of closely watched July inflation data and as Treasury yields rose for the seventh day in a row.

Futures linked to the Dow Jones Industrial Average were a touch lower, while S&P 500 futures lost 0.1%, and Nasdaq-100 futures fell 0.2%.

US consumer prices are forecast to rise by 5.3% year-over-year in July, slightly lower than June’s 5.4% jump but still close to the highest 12-month rate since 2008. The core CPI, which excludes food and energy prices, is expected to have increased by 4.4% from the year before

The Federal Reserve is still betting that elevated inflation readings will be temporary, a key part of its easy-money policies, but after last week’s stronger than expected July payrolls report a tapering by the US central bank is on the cards sooner rather than later.

In bond markets, the yield on the 10-year Treasury note ticked higher. The Senate passed a $3.5 trillion budget blueprint early Wednesday, the first step in an arduous process designed to allow Democrats to push through a sweeping package of education, healthcare, climate and other provisions without Republican support.

Investors are awaiting another batch of corporate earnings, with Wendy’s Co set to report before the market opens, and eBay Inc after the market closes.

Back in London, the FTSE 100 was managing to hold most of its gains over lunchtime and was up 32 points at 7,193.

12.00pm: FTSE 100 sitting at 18-month high

As lunchtime approached, the FTSE 100 was trading around its highest levels in 18 months as the blue-chip index jumped 37 points to 7,198 shortly before midday.

The mid-cap FTSE 250 was similarly on the ascent, rising 45 points to 23,617 after touching an all-time high of 23,635 in the early morning trading.

One blue-chips on the ascent was insurance firm Admiral Group (LSE:ADM) PLC, which rose 0.9% to 3,479 after reporting a hefty 63% increase in the interim dividend in its half-year results to 115p from 70.5p a year before, as the company posted a 76% increase in profit before tax from continuing operations.

The company attributed the profit surge to an early adjustment of its prices for pandemic-related claims, as well as a lower level of claims in general as lockdown measures reduced the number of cars on the roads.

“It’s been a half year of good execution for Admiral. By and large, we’ve done the right things more often and a bit earlier than most”, said Admiral chief executive Milena Mondini de Focatiis.

“Admiral comes out of its latest set of results looking like the Rolls Royce of motor insurers. Compared with its peers the growth in profit and customer numbers the company is chalking up is highly impressive”, said AJ Bell’s Danni Hewson.

“Shareholders are being richly rewarded with record dividend payments and Admiral’s strong financial position gives it lots of options while it works out what route it wants to take next. The road ahead could be a little bumpier for Admiral as the artificially lower levels of traffic and collisions driven by Covid restrictions starts to unwind, however the company has clearly demonstrated its ability to steer the right course”, the analyst added.

11.00am: Deliveroo cools as outlook spooks investors

The FTSE 100 was continuing to edge higher as the morning progressed, rising 32 points to 7,193 at around 10.45am.

The blue-chip index was being led higher by Spirax-Sarco Engineering (LSE:SPX), which jumped 2.8% to 15,580p on the back of a strong set of results, followed by JD Sports Fashion PLC (LSE:JD.) which rose 2.6% to 963.8p.

The biggest faller, meanwhile, was Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB), which slipped 1.2% to 6,454p.

Just Eat’s slip may be echoing the performance of rival Deliveroo PLC (LSE:ROO), which was down 3.7% at 349.7p after a set of reasonably strong results were overshadowed by a less than optimistic outlook statement.

The delivery app said it is “optimistic but prudent” as it expects continued year-on-year growth in orders with average values returning to pre-pandemic levels, although it stressed that growth in the first half was materially ahead of estimates and consumer engagement has been “encouraging” even if restrictions eased, so people’s habits are changing for good.

The somewhat uncertain guidance accompanied interim results that showed that in the six months to 30 June, gross transaction volumes rocketed 102% to GBP3.3bn with revenues up 82% to GBP922mln. Statutory loss before tax improved to GBP104mln from GBP128mln in 2020, while cash and cash equivalents at period-end were GBP1.6bn.

9.55am: FTSE 100 hits pandemic high

Heading into mid-morning, the FTSE 100 was up 30 points at 7,191, its highest level since late February 2020, the last few weeks before the onset of the COVID-19 pandemic sent stock markets tumbling.

Market sentiment appears to have been lifted by the approval of the US infrastructure package and stimulus plan overnight, although US inflation data later could still throw up some surprises.

In other recovery news, the travel sector was showing more signs of life after Heathrow airport reported that July had been its busiest month since March 2020 with over 1.5mln passengers passing through, although this was still down 80% on the same period in 2019 before the pandemic hit.

The numbers appear to have been juiced by the relaxation of travel restrictions and quarantine requirements for travellers into the UK, while the airport also unveiled plans for US carrier JetBlue to begin flights between New York and London this week, raising hope of a rebound in Trans-Atlantic travel.

The news lifted some airline stocks shortly before 10am, with British Airways owner International Consolidated Airlines Group (LSE:IAG) SA rising 1.6% to 169.5p while easyJet PLC rose 0.3% to 825.6p.

8.40am: FTSE 100 opens on the front foot

The FTSE 100 took its cue from Wall Street rather than Asia to open its account firmly in positive territory.

American stocks once again closed in record territory with President Joe Biden managing push through his US$1 trillion infrastructure bill.

Here at home volumes were fairly light, as was the news flow.

Cybersecurity specialist Avast (LON:AVST) led the index early on with a 3.7% advance after agreeing to be taken over by rival NortonLifeLock for GBP6.2bn.

Bargain hunters moved in for stock in British Airways owner IAG (LON:IAG), up 1.5%. Liberum’s move of recommendation to ‘buy’ may also have helped amp up the positivity towards the airline.

Among the tiddlers, one of the big movers was Minds + Machines (LON:MMX), which rose 13.4% after completing its planned asset sale.

6.50 am: FTSE 100 to start slightly higher

The FTSE 100 is expected to start slightly higher on Wednesday as investors awaited the latest US inflation readings

Spread-better IG expects the blue-chip index to open up around 8 points after ending Tuesday’s session 29 points higher at 7,161.

The higher start for the FTSE 100 followed a strong performance for most of the US markets overnight, with the Dow Jones Industrial Average closing 0.46% higher at a record 35,264 while the S&P 500 climbed 0.1% to 4,436, another record level. The Nasdaq was the only outlier, falling 0.49% to 14,788.

Traders on Wall Street were lifted by the passage of a US$1 trillion infrastructure bill by the US Senate yesterday, which will now head for a similar vote in the House of Representatives.

The positive sentiment continued in Asia this morning with Japan’s Nikkei 225 rising 0.5% while Hong Kong’s Hang Seng was up 0.14%.

On currency markets, the pound was down 0.04% against the dollar at US$1.383, although the US inflation data due later today could provide some movement catalysts.

Around the markets:

Sterling: US$1.383, down 0.04%

Brent crude: US$70.49 a barrel, down 0.2%

Gold: US$1,733 an ounce, up 0.36%

Bitcoin: US$45,722, up 0.1%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly higher on Wednesday as Singapore’s economy grew 14.7% in the second quarter compared to a year ago, better than official advance estimates of a 14.3% expansion.

The country also expects its economy to grow between 6% and 7% in 2021, an upgrade from its previous estimate of 4% to 6%.

The Shanghai Composite in China rose 0.08% and Hong Kong’s Hang Seng index lifted 0.16%

In Japan, the Nikkei 225 gained 0.56% while South Korea’s Kospi dipped 0.77%.

Shares in Australia rose, with the S&P/ASX 200 trading 0.22% higher.



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