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Inflation jumps | Barratt ‘strong’ | Good Energy rejects offer


5pm: Equities slip on inflation

The FTSE 100 closed down around 33 points, or 0.47%, at 7,091 as a stronger pound weighed on multinationals that earn most of their profits overseas, while a surge in inflation coupled with rising coronavirus cases raised worries of a slower economic reopening.

Barratt Developments gained 2% after it forecast 2021 profit to be marginally above the top end of market expectations.

1.30pm: John Lewis to cut jobs

John Lewis and its supermarket chain Waitrose are to cut 1,000 jobs as adapts to changing shopping habits. 

Full story here

9.30am: London ‘fragile’

Inflation worries saw trading in London edge lower. The FTSE 100 was 28.3 points off at 7,096.47.

Barratt Developments rose just 1.1% to 704.5p despite a bullish trading update (see below).

AJ Bell financial analyst Danni Hewson says: “Investors are happy to buy on the dips, but it also suggests we’re entering a more fragile state for the market.

“The muted reaction to house builder Barratt Developments’ lifting of full year guidance hints at longer-term concerns among investors over how long the current boom can last.”

7.15am: Inflation above target

Inflation rose further above the Bank of England’s target in June, rising to 2.5% from 2.1% in May.

Economists had expected consumer price inflation (CPI) to hit 2.2% in the 12 months to June.

The June figure is a 34-month high of 2.5%. Around half of the pickup between May and June was due to higher petrol and food prices,.

The Bank is forecasting it to peak above 3% as Britain’s economy recovers but it also thinks that the rise will be temporary and is in no hurry to reduce the stimulus measures.

Martin Beck, senior economic advisor to the EY ITEM Club, says: the EY ITEM Club remains sceptical about the idea that the UK is entering a new era of sustained higher inflation.

“Much of the impact of a stronger pound is still to pass through to consumer prices, the large amount of spare capacity will weigh on wage growth and margins, and inflation expectations remain well anchored. The institutions and labour and product markets which facilitated high inflation in the past are also lacking.”

7am: Good Energy rejects possible offer

The board of Good Energy Group, the 100% renewable electricity supplier, has rejected a possible 340p per share cash offer by Ecotricity Group announced on Monday.

Will Whitehorn, chairman, said: “This is a highly opportunistic approach by a direct competitor to the company which the board believes is not in the best interests of our shareholders, employees or customers.

“We have a clear strategy, a strong leadership team and a proven track record in delivering on our objectives.”

7am: Barratt ‘strong’

The house builder said adjusted profit before tax for the year is anticipated to be marginally above the top end of the range of market expectations.  

Profit before tax, after adjusted items of c. £107m, is expected to be at the top end of the range.

David Thomas, chief executive, said: “We have seen continued strong demand for our high quality, energy efficient homes on well-designed developments, enabling us to deliver 17,243 home completions this year (2020: 12,604 homes; 2019: 17,856 homes).

“Whilst these are still uncertain times, we enter the new financial year in a strong position and remain focused on our medium term targets, including delivering 20,000 homes a year.”

Global markets

UK inflation data was due later amid concern it will follow the US which jumped ahead of expectations.

The headline American consumer price index rise (CPI) rose 5.4% in June compared to a year ago, above the 5% in May and above the 4.9% increase expected by analysts.

The reading drove Wall Street to a lower close overnight, with the Dow Jones Industrial Average ending 0.31% down while the S&P 500 dropped 0.35% and the Nasdaq fell 0.38%.

Sentiment was similarly more negative in Asia this morning, with Japan’s Nikkei 225 down 0.3% while Hong Kong’s Hang Seng fell 0.78%.

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