Market report

US inflation data gives equities a reason to rally


Markets on both sides of the Atlantic rallied as cooler than expected US inflation numbers support the narrative that peak interest rates have been reached.

US annual headline CPI inflation came in at 3.2% for October against expectations of 3.3%.  UK wage growth in the three months through September eased ahead of inflation figures on Wednesday morning which are expected to show a sharp fall.

“Despite a few bumpy patches the landing strip ahead looks about as soft as anyone could have hoped for,” said Danni Hewson of AJ Bell.

However, David Goebel at wealth management firm Evelyn Partners, was more cautious. “We think it is unlikely to change the FOMC’s hawkish bias, and the prospect of rate cuts, currently priced into markets to start in summer next year, remains a long way off.”

The FTSE 100 managed a small gain of 14.64 points to close at 7,440.47.

Among equities, Glencore advanced 19.55p (4.54%) to 450.2p as the commodities trader sealed a deal for a 77% stake in the steelmaking coal business of Canada’s Teck Resources for $6.9 billion in cash.

Russ Mould, investment director at AJ Bell, said: “This is a striking move on the part of the diversified miner and commodities trader.

“At a time when most mining businesses are turning away from coal due to its polluting nature Glencore is seemingly doubling down on the fossil fuel.

“However, there is more to this move than meets the eye as Glencore plans to spin-off the assets acquired from Teck, which are steelmaking coal rather than thermal coal, and its own coal portfolio into a separate business.

“The aim is to list this entity separately on the stock market in a couple of years’ time when the two businesses have been successfully integrated.

“The company has a reputation for ruthlessness and, while this deal will do little for its public reputation, it clearly feels the move makes business sense.”

Shares in defence firm Babcock rose over 1% after the company restarted dividend payments and reported a significantly higher first-half profit.

In the six months to 30 September pretax profit jumped to £136.1 million from £51.2m last time. After a four-year break, Babcock declared an interim dividend of 1.7 pence per share.

Chief Executive David Lockwood said the dividend reflects confidence, and full year expectations remain unchanged.

Babcock shares are up 45% year-on-year.

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