UK shares climbed on Thursday, lifted by industrials and travel stocks, while Ashtead Group gained after a strong earnings update.
The blue-chip index rose 0,5 percent, while the domestically focused mid-cap FTSE 250 index advanced 0,6 percent, after sliding 1,1 percent in the previous session on concerns around spiking inflation.
Rolls Royce and British Airways owner IAG added 3,8 percent and 3.6 percent, respectively. They were among the biggest gainers in Aero and defence and travel and leisure indexes.
Drugmaker AstraZeneca’s 1,2 percent jump provided the biggest boost to the FTSE 100 index.
Rental equipment provider Ashtead climbed 2,6 percent after it reported a 68 percent rise in first-quarter adjusted pretax profit and forecast annual results above its earlier expectations.
“Ashtead is a textbook cyclical company … means when the economy grinds to halt, so does Ashtead’s business,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
“That’s partly why the numbers look so flattering this quarter against the very tough conditions of last year.”
The FTSE 100 and the FTSE 250 indexes have declined about 1 percent and 2,3 percent, respectively, so far this month as a better-than-expected labour market recovery and rising price pressures have stoked concerns of a sooner-than-expected policy tapering by the Bank of England.
“The FTSE will likely continue feeling the pinch of a stronger pound and break the 7000p support despite firming oil and energy prices, because the reflation trade isn’t strong enough,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The banks, miners, homebuilders, and even travel and leisure stocks have fallen between 1,5 percent and 5,9 percent so far in September.
Investors will now closely watch August retail sales data on Friday and the outcome from the BoE’s policy meeting next week.
Drax rose 7 percent to the top of FTSE 150 index after Barclays raised its price target on the British power generator’s stock.
IG Group Holdings Plc jumped 4,3 percent as the online trading platform maintained its medium-term targets after reporting a drop in adjusted first-quarter revenue. Reuters
Sterling seeks direction as traders assess inflation impact
LONDON – Sterling rose against the euro and fell versus the dollar on Thursday as traders assessed the Bank of England’s next move after data showed British inflation hit a more than nine-year high in August, fuelling expectation of a rate increase.
The BoE expects inflation to hit a peak of 4 percent this year. The strong reading for inflation could reinforce expectations that the central bank is set to tighten monetary policy quicker than the European Central Bank or the U.S. Federal Reserve.
Consumer prices in Britain rose by 3.2 percent in annual terms last month, the biggest monthly jump in the annual rate in at least 24 years.
ING analysts expect cable to settle around $1,38-$1.39 in the near term, as they argued that the lifting of energy price caps in October could potentially send the October and November readings above 4 percent.
Britain’s energy regulator said it would increase its cap on the most widely used tariffs by about 12-13 percent. read more
“Should UK growth/inflation data come in on the strong side, the market’s search for the BoE terminal rate could keep GBP supported,” said Chris Turner, Global Head of Markets at ING in a note to clients.
A poll from Reuters found that investors believed the BoE would raise borrowing costs by the end of 2022. The latest inflation numbers brought forward these expectations to mid-2022.
Versus the dollar, sterling edged 0,2 percent lower at $1,3812 at 0840 GMT, off the 5-week high of $1,3913 touched earlier this week, with Asian stock losses also weighing on sterling.
“The correction in GBPUSD is a function of the weak performance across Asian bourses, the slide is proving to impact risk sensitive crosses including cable,” said Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets.
Sterling was 0,15 percent higher versus the euro at 85,25 percent. — Reuters