London midday: FTSE edges up as energy stocks rally; inflation data digested
London stocks had edged a little higher by midday on Tuesday thanks to a solid performance in the energy sector, as investors digested the latest inflation figures.
The FTSE 100 was up 0.2% to 7,469.84, while the pound was flat against the euro and the dollar at 1.1331 and 1.3342, respectively, following a brief spike higher on the back of the latest inflation figures.
Data released earlier by the Office for National Statistics showed UK consumer price inflation has risen so high that Bank of England governor Mark Carney will have to write a letter to the Chancellor explaining why and what he intends to do about it.
November's consumer price index was 3.1% higher year on year, the highest rate since March 2012 and up from the 3% at which it has been for the previous two months and at which it was expected to remain for at least another month.
Annual CPI growth was lifted by a 0.3% month-on-month increase in November, which was up from the 0.1% rise in October and higher than the 0.2% consensus forecast.
Core CPI, which excludes more volatile prices such as for fuel and food, stayed at 2.7%, as economists had predicted. CPIH, the ONS's preferred measure of inflation as it includes owner-occupiers' housing costs, was unmoved at 2.8% in November, though the market had expected it to nudge up to 2.9%.
The Bank of England’s 2% target for inflation has been exceeded for the last 10 months and if the headline rate moves more than 1% higher or lower, the governor is obliged to write a formal letter to the Chancellor. This letter will be Carney's first since October 2016 when inflation was a below-target 0.9%.
Upward pressure on CPI came from competition in the airline industry as air fares fell by less than they did last year, while there was also some price pressure in household services, recreation and culture, food and drink, as well as restaurants and hotels.
IG market analyst Chris Beauchamp said: "While the one rate hike so far was never meant to slay the inflation dragon straight away, it will doubtless come as an unpleasant shock, and a sign that there will be further tough decisions in the months to come. For now their best strategy is to continue talking a good game on policy, to illustrate that the MPC remains in control.
"While inflation is expected to weaken in due course, potentially lessening the pressure on the BoE, it could be an anxious time over Christmas. Data later in the week on wages and retail sales should provide plenty of information as to whether the ongoing wage squeeze means Christmas 2017 will be a difficult one for retailers."
On the corporate front, British Gas owner Centrica was the standout gainer as UK gas prices rose after an explosion at a natural gas facility near Austria's border with Slovakia and as Britain's Forties pipeline - which carries 40% of North Sea oil and gas - was closed for repair due to a crack.
Energy stocks BP and Shell gushed higher as oil prices rose due to the closure of the Forties pipeline, with oil services groups Petrofac, Tullow Oil and Cairn Energy also up.
Industrial equipment rental firm Ashtead rallied after it posted a 16% rise in half-year pre-tax profits to £493.1m and announced the start of a share buyback programme, of at least £500m and up to £1bn over the next 18 months.
Construction group Balfour Beatty was trading up after saying it is "increasingly confident" of improving margins this year as it continues to win new business on better terms, while Elementis was on the front foot after agreeing to sell its Netherland surfactants unit for €39m.
Sainsburys and Morrisons were in the red following the release of the latest data from Kantar Worldpanel. Sainsburys sales were 2% higher in the past 12 weeks, but the supermarket chain saw its market share drop to 16.3% from 16.5%. Meanwhile, Morrisons till receipts were up 1.4% and its share down two points to 10.6%.
Sainsburys was also likely taking a hit from its inclusion in a Goldman Sachs list of 10 Sell Ideas, with Next and William Hill - both weaker - also in the frame.
In broker note action, Experian was boosted by an upgrade to 'outperform' at Exane, while Homeserve gained as JPMorgan Cazenove lifted the stock to 'overweight' and Grainger was up on the back of an initiation at 'overweight' by Barclays.
Mediclinic and Moneysupermarket were hit by downgrades from JPMorgan Cazenove, while Capital & Counties was weaker as Barclays initiated coverage of the stock at 'underweight'.
Pub group Greene King was under the cosh after a downgrade to 'underweight' from JPMorgan, with Marston's following suit.
Market Movers
FTSE 100 (UKX) 7,469.84 0.22%
FTSE 250 (MCX) 20,024.18 -0.20%
techMARK (TASX) 3,476.28 0.33%
FTSE 100 - Risers
Centrica (CNA) 145.70p 2.97%
Experian (EXPN) 1,603.00p 2.43%
Micro Focus International (MCRO) 2,482.00p 1.97%
AstraZeneca (AZN) 4,948.00p 1.46%
Shire Plc (SHP) 3,768.50p 1.44%
BP (BP.) 505.40p 1.34%
Royal Dutch Shell 'A' (RDSA) 2,417.48p 1.34%
Severn Trent (SVT) 2,112.00p 1.29%
SSE (SSE) 1,336.00p 1.29%
Royal Dutch Shell 'B' (RDSB) 2,442.50p 1.24%
FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 214.20p -3.25%
Sainsbury (J) (SBRY) 237.10p -3.11%
Fresnillo (FRES) 1,284.00p -1.68%
Persimmon (PSN) 2,638.00p -1.64%
Next (NXT) 4,355.80p -1.52%
Taylor Wimpey (TW.) 200.80p -1.47%
Paddy Power Betfair (PPB) 8,370.00p -1.47%
Burberry Group (BRBY) 1,713.00p -1.44%
Merlin Entertainments (MERL) 360.00p -1.34%
Hammerson (HMSO) 518.00p -1.33%
FTSE 250 - Risers
Tullow Oil (TLW) 196.50p 3.31%
Cairn Energy (CNE) 221.60p 2.78%
Elementis (ELM) 282.80p 2.13%
Homeserve (HSV) 801.00p 2.04%
Petrofac Ltd. (PFC) 443.75p 2.01%
Wizz Air Holdings (WIZZ) 3,522.00p 1.62%
IP Group (IPO) 147.50p 1.58%
Hill & Smith Holdings (HILS) 1,319.00p 1.46%
Mitchells & Butlers (MAB) 263.10p 1.39%
Clarkson (CKN) 2,857.00p 1.24%
FTSE 250 - Fallers
Acacia Mining (ACA) 170.33p -3.82%
Ferrexpo (FXPO) 256.80p -3.20%
Workspace Group (WKP) 904.50p -2.90%
JD Sports Fashion (JD.) 319.90p -2.83%
GVC Holdings (GVC) 930.00p -2.62%
Jupiter Fund Management (JUP) 596.00p -2.53%
Moneysupermarket.com Group (MONY) 334.00p -2.51%
William Hill (WMH) 306.30p -2.42%
Restaurant Group (RTN) 275.52p -2.30%
Thomas Cook Group (TCG) 116.30p -2.27%