Finance

MARKETS LIVE: London shares turn up, while the pound drops off after inflation in June eases

Inflation unexpectedly slowed in June for the first time since October, adding to the likelihood that the Bank of England will keep interest rates at a record low in August.

Consumer prices rose by 2.6 per cent compared with a year earlier, the Office for National Statistics said, down from a nearly four-year high of 2.9 per cent in May.

Economists had expected the rate to remain unchanged. After the data the pound dropped against the dollar, resulting in a 10 point rise for the FTSE 100.

After the data the pound dropped against the dollar, resulting in a 10 point rise for the FTSE

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Royal Mail was one of the biggest risers on the FTSE 100 this morning after it said growth in its parcel division and UK political mailings in the run up to June’s snap election boosted revenues by more than expected.

The privatised group, which floated on the stock market in October 2013, posted a 1 per cent rise in group revenue in the three months to the end of June, as strong growth at its European parcel division helped offset falling revenues in the UK.

Shares in the company rose 2.9 per cent or 11.66p to 410.42.

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Dennis de Jong, director at UFX.com, said: ‘Mark Carney will be relieved that he hasn’t had to write to the Chancellor today about spiralling inflation, and the drop back to 2.6 per cent will give him and his Bank of England colleagues a little breathing space.

‘These are still very testing times for the country as a whole. Holidaymakers are preparing to pack their bags and they’re going to get a shock when they see how many euros their hard-earned pounds are worth.

‘Even though inflation has dropped back in June, the weak pound is likely to see it rise further later in the year. Wages remain stagnant and with Brexit negotiations rumbling on, the uncertainty isn’t going away any time soon.’

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The drop primarily reflected a 0.1 percentage point decline in motor fuel’s contribution to inflation due to the fall in oil prices, Samuel Tombs at Pantheon Macroeconomics said.

He added: ‘The sharp fall in CPI inflation in June brings it back in line with the MPC’s May Inflation Report forecast and almost certainly eliminates the chance of an interest rate rise at the August meeting.

‘Indeed, the Committee likely will revise down its forecast for inflation next month, given the recent fall in oil prices and the deterioration in wage growth.’

10:00

After taking a beating last week Carillion looked on its knees.

But a series of contract win announcements this week has gone a little way to repairing the damage for the infrastructure giant.

Carillion has secured another two Government contracts just a day after being named as one of the builders of the controversial HS2 rail line.

Carillion said its joint venture has secured contracts worth £158million to deliver facilities management services at more than 230 military sites across the north of England, Scotland and Northern Ireland.

The group said it had the potential to double the value of the five-year Ministry of Defence contracts through food and retail sales.

Yesterday shares rebounded 17.5 per cent on news of the HS2 contract and after it announced plans to appoint accountancy giant EY for a review of the business.

Chief executive Richard Howson also stepped down with immediate effect last week as the group said it would need to bolster its balance sheet and was struggling to stay within its borrowing limits.

Its latest contract wins will see it provide catering, retail and leisure services, as well as hotel and mess services.

The north contract will employ around 1,500 staff, covering 130 military sites from next January, while the Scotland and Northern Ireland contract starts from this November across another 103 military sites and will employ around 1,030 people.

Interim boss Keith Cochrane, who has stepped in to replace Howson until a permanent replacement can be found, said: ‘These contracts play a critical role in supporting our armed forces and they have a number of unique aspects that require a specific, regional focus.’

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David Cheetham, at XTB Limited, said: ‘The latest inflation data from the UK has come in slightly lower than expected, with a 2.6 per cent year-on-year rise in CPI.

‘Whilst this is below both the consensus estimate and prior reading it still far exceeds the Bank of England’s 2 per cent threshold.

‘Furthermore, with the most recent wage data indicating a 2 per cent rise in annualised terms, real earnings remain squeezed. The reaction in GBP has been a swift drop of around 50 pips against the US dollar, after the cross printed a 9 month high earlier this morning, albeit more due to weakness in the buck rather than broad sterling strength.’

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British Land intends to spend up to £300million to buy back its shares in this financial year citing limited investment opportunities.

Online financial trading company IG Group said full-year pretax profit rose 3 per cent.

Just Group, which specialises in selling financial products for retirement, reported on a 3 per cent increase in new business sales in the six months to end-June.

Rio Tinto lowered its forecast for shipments of iron ore in calendar 2017 by up to 10 million tonnes due to bad weather and ongoing work to modernise its rail haulage lines.

The unlikely combination of Harry Potter and Bruce Springsteen helped pump up revenues at publisher Bloomsbury in the first quarter as sales at the group’s digital division picked up pace.

The group said total revenues rose 19 per cent in the three months to May 31, or 13 per cent on a constant currency basis.

Top-selling titles in the period included JK Rowling’s evergreen Harry Potter series, Neil Gaiman’s Norse Mythology and A Court Of Wings And Fury by Sarah J Maas.

Dairy Crest, the owner of Cathedral City cheese and Clover margarine, has warned over the soaring cost of butter, which it says will put it under pressure this year.

The cheese and spreads maker said cream prices, which determine input costs for its butter business, have risen ‘substantially’ during the first quarter.

Despite this, the firm said trading in the first quarter was in line with expectations and the outlook for the full year remains unchanged.

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Inflation is the only game in town, while Bank of England governor Mark Carney is due to speak later today as he unveils the new plastic £10 featuring Jane Austen

Connor Campbell, at Spreadex, said: ‘The FTSE could have more sterling woes this morning if inflation rises past the 3 per cent mark.

‘Analysts are expecting the CPI reading to have remained at 2.9 per cent in June; however, the figure has outperformed estimates for the last 4 months in a row, suggesting we could get another surprise this morning.

‘The Bank of England is so conflicted about what to do in regards to interest rates at the moment that a significant move in the inflation reading, be it up or down, could help push undecided MPC members in a hawkish or dovish direction ahead of the next meeting in early August.’

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