(Alliance News) - The annual UK inflation rate accelerated more than expected in July, figures showed on Wednesday, with prices surging by double-digits.
The consumer price index surged 10.1% on an annual basis in July, topping FXStreet-cited market consensus of 9.8% and quickening from 9.4% in June.
According to the Office for National Statistics, it was a fresh high for the annual inflation rate in the current series, which began in January 1997. Modelling would suggest the last time inflation was this red-hot was in 1982, 40 years ago.
"A wide range of price rises drove inflation up again this month. Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices," said Grant Fitzner, ONS chief economist.
Fitzner also cited price rises in other staple items, such as pet food, toilet roll and deodorant, as well as higher prices for package holidays and air fares.
On a monthly basis, consumer prices rose 0.6% in July, slowing from growth of 0.8% in June. Still, this had been expected by analysts to slow further, to 0.4%.
The figures come after numbers on Tuesday put the jobs market and wage growth under the spotlight.
On an inflation-adjusted basis, regular UK wages fell 3.0% year-on-year in the three months to June, according to the ONS. July's red-hot inflation figure is likely to make that pay squeeze even tighter.
"While inflation in the US may now have reached a peak, we still think that CPI inflation in the UK will rise to at least 12.5% in October and that the Bank of England will raise interest rates from 1.75% now to 3.00%, even when the economy is in recession. That remains a higher forecast than the peak of 2.55% envisaged by the consensus of analysts," commented Ruth Gregory, senior UK economist at Capital Economics.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.1% at 7,543.84
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Hang Seng: up 0.7% at 19,965.15
Nikkei 225: closed up 1.2% at 29,222.77
S&P/ASX 200: closed up 0.3% at 7,127.70
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DJIA: closed up 239.57 points, or 0.7%, at 34,152.01
S&P 500: closed up 8.06 points, or 0.2%, at 4,305.20
Nasdaq Composite: closed down 25.50 points, or 0.2%, at 13,102.55
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EUR: down at USD1.0163 (USD1.0177)
GBP: up at USD1.2101 (USD1.2099)
USD: up at JPY134.48 (JPY134.28)
Gold: up at USD1,776.92 per ounce (USD1,774.80)
Oil (Brent): down at USD92.99 a barrel (USD93.04)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's key economic events still to come
1100 CEST EU employment flash estimate
1100 CEST EU GDP
0845 CEST France new home sales
0930 BST UK ONS house price index
0700 EDT US MBA mortgage applications survey
0830 EDT US retail sales
1000 EDT US manufacturing & trade inventories & sales
1030 EDT US EIA petroleum report
1400 EDT US FOMC minutes
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UK Conservative MP Liz Truss, the favourite to become prime minister next month, suggested Britons lacked "skill and application" and needed to work harder, in a leaked audio recording released Tuesday. In the two-minute audio clip, which dates from her time as a senior minister in the finance ministry between 2017 and 2019, Truss said workers' "mindset and attitude" were partly to blame for the UK's relatively poor productivity. "It's working culture basically," she said in the recording, obtained by the Guardian newspaper, adding British workers needed "more graft". "If you go to China it's quite different, I can assure you. "There's a fundamental issue of British working culture...I don't think people are that keen to change." The embarrassing leak comes as Truss emphatically leads rival Rishi Sunak in numerous polls in the race to become prime minister when Boris Johnson stands down early next month.
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Republican rebel Liz Cheney lost her seat in US Congress Tuesday to an election conspiracy theorist, but vowed to fight on and do "whatever it takes" to ensure that former president Donald Trump is never returned to power. Once considered Republican royalty, the lawmaker from Wyoming has become a pariah in the party over her membership on the congressional panel investigating the January 6 assault on the US Capitol – and Trump's role in fanning the flames. "I have said since January 6 that I will do whatever it takes to ensure Donald Trump is never again anywhere near the Oval Office, and I mean it," the Wyoming congresswoman said in a concession speech after losing her bid at reelection. Defeat for the 56-year-old daughter of former vice president Dick Cheney in the Wyoming Republican primary marks the end of the family's four-decade political association with one of America's most conservative states. The Republican nomination to contest November's midterms instead goes to 59-year-old lawyer Harriet Hageman – Trump's hand-picked candidate who has amplified his false claims of a "rigged" 2020 election.
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US President Joe Biden on Tuesday signed into law a big climate change and health care spending bill, giving Democrats another boost ahead of midterm elections in which Republicans are suddenly less certain of their predicted crushing victory. The law, dubbed the Inflation Reduction Act, was touted by the White House as the biggest commitment to mitigating climate change in US history, as well as targeting long sought changes in the way medicines are priced and adding fairness to the tax system, with a minimum 15% tax for corporations. Under the plan, the government will spend about USD370 billion on green energy initiatives while also allowing the state-run Medicare system to negotiate prices for prescription drugs, something expected to cut sharply into the often ruinous prices Americans are forced to pay.
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BROKER RATING CHANGES
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LBBW raises BT Group to 'buy' ('hold') - target 190 pence
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COMPANIES - FTSE 100
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Housebuilder Persimmon said revenue in the half-year to June 30 fell 8.3% to GBP1.69 billion from GBP1.84 billion. Pretax profit declined 8.4% to GBP439.7 million from GBP480.1 million. "We are on track to achieve a 10% increase in our active outlets by the end of the current year as we work to rebuild our outlet position after a land buying pause three years ago and are tackling the on-going challenges in the planning system...We continue to expect our volume delivery to be significantly higher in the second half of the year," said Chief Executive Dean Finch. The new home average selling price was GBP245,597 during the period, up from GBP236,199 a year earlier. Completions during the half amounted to 6,652 new homes, down from 7,406 a year earlier, as expected. Persimmon backed guidance of 14,500-15,000 completions for the full year. It added that "sales price inflation is currently mitigating the cost inflation the industry is experiencing".
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GSK said the first scheduled trial over Zantac has been voluntarily dismissed. GSK, among others, has come under pressure recently over Zantac litigation concerns. Zantac was withdrawn after the US Food & Drug Administration in 2019 warned that the product contained levels of NDMA, a probable human carcinogen - a substance which has been linked to cancer. GSK consumer healthcare spin-off Haleon is implicated, as is French firm Sanofi and US firm Pfizer. The pharma firm noted it did not pay anything in exchange for the voluntary dismissal. "GSK welcomes this outcome and believes the dismissal of Joseph Bayer's case is the correct result. The overwhelming weight of the scientific evidence supports the conclusion that there is no increased cancer risk associated with the use of ranitidine. GSK will continue to vigorously defend itself against all claims alleging otherwise," it added. Moving forward, GSK noted that of cases where it is named, a trial in California is currently scheduled to begin February 13 and a trial is currently scheduled to begin in Madison County, Illinois in February 2023.
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COMPANIES - FTSE 250
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Plus500 said revenue in the first half of 2022 surged 48% to USD511.4 million from USD346.2 million a year earlier. Pretax profit jumped by two-thirds to USD312.6 million from USD188.7 million. "Plus500 produced another outstanding performance in the first half of 2022, driven by the power of our market-leading proprietary technology and our consistent ability to attract and retain higher value customers over the long term. With continued operational and financial momentum being achieved, we also made substantial progress in delivering against our strategic priorities, in particular the major growth opportunities in the US, where we are continuing to make significant on-going investment, also by becoming a full clearing member of the CME Group exchanges," CEO David Zruia said. In addition, it has announced a new USD60.2 million buyback, which will kick off following the conclusion of current share repurchase programmes. Plus500 added: "Following several positive upgrades to market expectations related to Plus500's financial performance, which took place earlier this year, the board remains optimistic about the group's performance, with sustainable growth to be delivered over the medium to long term."
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Balfour Beatty lifted yearly profit guidance. For the half year ended July 1, the construction firm's revenue was largely unchanged year-on-year at GBP4.15 billion. Pretax profit more than doubled to GBP83 million from GBP35 million. Balfour raised its dividend by 17% to 3.5 pence per share from 3.0p. "Driven by this performance and also the strength of the order book, the board expects underlying profit from operations to be ahead of its previous expectations," Balfour said.
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COMPANIES - SMALL CAP
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Picturehouse operator Cineworld said film goers have been "below expectations" recently. "These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group's liquidity position in the near term," it warned. "Consequently, the group has been taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions. This includes significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity." Cineworld said it is in "active discussions with various stakeholders" to mull ways to bolster its coffers and possibly restructure its balance sheet, though a "comprehensive deleveraging transaction". It warned that any deleveraging is likely to dilute the value of its shares. Cineworld added: "The group's business operations are expected to remain unaffected by these efforts and Cineworld expects to continue to meet its ongoing business counterparty obligations. Cineworld continues to welcome guests to its cinemas across its global markets as normal, without disruption."
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Online-only retailer boohoo said it has made a "strategic investment" in beauty products seller Revolution Beauty Group. It now has a 7.1% stake. "The investment builds upon the existing relationship between boohoo and Revolution Beauty, under which Revolution Beauty products are sold through several of the group's direct to consumer brand websites and its online digital department store, Debenhams. The investment reflects boohoo's belief in the growth potential of Revolution Beauty and it intends to be a supportive stakeholder and long-term partner," boohoo explained. Shares in Revolution Beauty plunged last week after it warned that auditors had raised "certain accounting issues" which could result in material adjustments, denting profitability for the 2022 financial year.
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COMPANIES - GLOBAL
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Elon Musk tweeted on Tuesday that "I'm not buying any sports teams", calling a viral post about him purchasing Manchester United a joke. The world's richest man has a habit of posting provocative statements on Twitter for fun and Musk was at it again when he told his more than 103 million followers: "Also, I'm buying Manchester United ur welcome." The billionaire Tesla Inc and SpaceX CEO made the comment in reply to another of his tweets, about supporting both of the US' two major political parties. The 51-year-old, who is embroiled in a lawsuit over his bid to buy Twitter, was subsequently asked on the platform if he was serious about owning Manchester United. "No, this is a long-running joke on Twitter. I'm not buying any sports teams," Musk replied, after his original tweet garnered nearly 500,000 "likes" in a matter of hours.
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Amazon.com will raise its seller fees for the upcoming holiday season, CNBC reported. The Seattle-headquartered e-commerce firm will up its fulfilment fees, looking to pass off increased costs to merchants. CNBC reported the move is an attempt to handle soaring inflation. Starting October 15, and running through January 14, third-party sellers will have to pay 35 US cents per item sold in the US or Canada. Revenue from third-party seller services, which includes commissions collected by Amazon, fulfilment, shipping fees and other charges, rose 13% in the second quarter from a year earlier to USD27.4 billion.
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Wednesday's shareholder meetings
Calnex Solutions PLC - AGM
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By Lucy Heming; lucyheming@alliancenews.com
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