Daily Business Live

Inflation hits 5.1% as Bank ponders interest rate


5pm: Market down ahead of BoE meeting

The FTSE 100 finished the day 47.89 points, or 0.7%, lower at 7,170.75 ahead of a Bank of England meeting tomorrow as consumer prices increased 5.1% in November, the highest level in a decade.

Notable movers included Cineworld Group, which plunged nearly 40% after a Canadian court ruled that the company is required to pay $957 million in damages for terminating its takeover deal with rival Cineplex.

Danni Hewson at AJ Bell said:  “It’s going to appeal and says it doesn’t expect to have to pay out any of the cash until that appeal runs its course. It could have been far worse; Cineplex had been looking for double that figure after Cineworld changed its mind about buying the company as Covid ravaged the globe.”

Brent crude is set to drop to $70 per barrel on the back of an expected oversupply of oil in the first quarter of 2022, Commerzbank said in a note.

It traded at $72.72 per barrel early today, down by 1.33%, as traders are still assessing the potential impact of Omicron on global oil demand amid mounting signs that an oversupply on the market is imminent.  

9.30am: Bank may resist response to inflation

AJ Bell investment director Russ Mould says: “The squeeze on the cost of living is just getting worse as consumer prices jumped 5.1% in November (see below), the highest annual increase in a decade, putting renewed pressure on the Bank of England to take action.

“It seems unlikely the Bank will move on rates tomorrow as the UK looks ahead to a potentially substantial wave of Omicron cases. However, today’s data suggests Andrew Bailey and his colleagues don’t have the luxury of too much time to see how the new variant affects the economy.

“If they don’t act before Christmas, they have may little choice at their first meeting of 2022 at the beginning of February.”

8.15am: London opens lower

The FTSE 100 index opened 11.62 points lower at 7,207.02.

7.30am: Silverburn sold

Silverburn shopping centre in Glasgow has been acquired by Henderson Park, a European private equity real estate firm headquartered in London.

Full story here

7am: Inflation leaps

Inflation leaped to 5.1% in November, raising the likelihood of an interest rate rise on Thursday.

The Consumer Price Index reading for the 12 months to November compared to 4.2% in October, which was the steepest incline for a decade and more than double the Bank of England’s target.

Economists polled by Reuters had expected a reading of 4.7% for November, and the Bank of England had projected that inflation would not hit 5% until the spring of 2022 before moderating towards its 2% target in late 2023.

The MPC defied market expectations in November by voting 7-2 to hold interest rates at their historic low of 0.1%.

Analysts are divided on whether the MPC will feel the time is right for a hike as the emergence of omicron casts a cloud over the economy and costs continue to rise.

Suren Thiru, head of economics at the British Chambers of Commerce, said: “Inflationary pressures are expected to intensify in the near term as the rising cost of imported raw materials, higher energy prices and the reversal of the VAT reduction for hospitality and tourism drives inflation materially higher by the middle of 2022.”

7am: Evraz to demerge coal business

Commodities group Evraz, whose key shareholders include Chelsea FC owner Roman Abramovich, is planning to offload its coal assets.

It believes that splitting the company from its coal business PJSC Raspadskaya (RASP) will be in the interests of shareholders, employees and customers.

If the demerger proceeds, EVRAZ shareholders are expected to receive an entitlement to 0.4255477880 of a RASP share for each EVRAZ share held at 6:00 p.m. on 15 February 2022.

EVRAZ’s dividend policy continues to anticipate dividend payments to shareholders of a minimum amount of US$300 million per annum, provided that the EVRAZ Group’s net debt/EBITDA ratio remains below 3.0x.

Global markets

London was expected to open slightly lower as equity markets await the US Federal Reserve’s latest monetary policy decision and UK inflation figures.

Annual UK inflation is expected to accelerate to 4.7% in November, from 4.2% in October. This will be monitored by the Bank of England which will announce its decision on interest rates on Thursday.

CMC Markets analyst Michael Hewson said that if the Bank chooses to leave rates unchanged there is unlikely to movement until the meeting on 3 February.

US stocks closed lower on Tuesday. The Dow Jones Industrial Average ended down 0.3%, the S&P 500 lost 0.8% and the Nasdaq Composite fell 1.1%.

Tokyo’s Nikkei 225 inched up 0.1%. The Shanghai Composite was down 0.2% in late trade, while the Hang Seng in Hong Kong was 0.7% lower. 

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