Easing UK inflation detracts attention from Greece

UK equities edged higher again on Tuesday as consumer prices fell back in line with the BoE's target rate

Holly Cook | 23-03-10 | E-mail Article

UK price inflation back within the Bank of England’s target range and pleasing corporate news from the likes of Cairn Energy and Legal & General helped London’s benchmark index edge higher on Tuesday as investors welcomed a distraction from Greek woes.

The FTSE 100 index took on 29.1 points to add 0.5% to 5,673.6, while the FTSE 250 index rose 38.2 points or 0.4% to 10,030.1.

The annual change in UK consumer prices eased to 3% in February after January’s 3.5% increase, putting it back within the Bank’s target rate of 2% plus or minus 1%, albeit at the upper end of the scale. “Probably the main risk in the short term to the Bank of England’s target rate comes from a significant sterling depreciation,” commented the Centre for Economics and Business Research’s Owen James following the inflation report. “A budget tomorrow that eases market concerns over the United Kingdom’s fiscal position will help make this scenario less likely.”

Across the pond, Wall Street movement was subdued following Monday’s healthcare-led gains, despite US housing market data topping economist forecasts. Attention also turned to Treasury Secretary Timothy Geithner's testimony on housing finance. Geithner is expected to tell a congressional panel that Fannie Mae and Freddie Mac won't return to their pre-crisis forms.

Back in the UK, less than a third of the FTSE 100’s constituents had slipped into the red by close of play and, among the winners, Cairn Energy stood out with an 8.0% share price jump after the oil explorer increased its reserve estimates.

Insurer Legal & General was second in line, having gained 4.7% after beating market forecasts to report 2009 profits of £863 million versus the previous year’s loss of more than £1 billion. The group also lifted its final dividend, bringing the total annual payment due to shareholders to 3.84p per share.

Elsewhere, a number of miners and banks were in demand as investor appetite for commodity and financial plays continued. A research report released today suggests active investors’ overall confidence has slipped over the past 12 months but their appetite for riskier assets remains strong. As such, Eurasian Natural Resources led the metal extractors higher with a 3.8% gain and Lloyds Banking Group topped the British banking leaderboard with a rise of 3.1%.

Having endured three days of industrial action, shares in British Airways climbed 2.7% higher after the national carrier said it had limited the cost of the strike to £21 million and has made little change to full-year earnings expectations.

On the second tier, defence companies were in the spotlight once again after Babcock International announced that VT Group has accepted its takeover offer, worth just under 735p per share, following its rejected offer last month of 634p a share. Babcock and VT closed 5.2% and 4.6% ahead, respectively.

Holly Cook is Site Editor of Morningstar.co.uk and Hemscott.com. She would like to hear from you but cannot give financial advice. You can contact the author via this feedback form.
© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookie Settings        Disclosures