London close: Stocks finish higher as US inflation cools

London's financial markets closed positively on Friday, as investors were buoyed by an optimistic consumer confidence survey and a lower-than-anticipated inflation reading from across the pond.

The FTSE 100 rose 1.4% to reach 7,635.09 points, while the FTSE 250 saw gains of 0.6%, closing at 19,338.02 points.

In currency markets, sterling was last up 0.06% on the dollar to trade at $1.2715, while it showed a slight decline of 0.1% against the euro, changing hands at €1.1704.

“The FTSE 100 rocketed% on a brighter economic outlook today, and rose by nearly 2.4% this week, helped by a rising oil price, strong US personal spending, home sales rising the most in three years and a weaker-than-expected PCE index - the Fed's preferred inflation gauge,” said IG senior market analyst Axel Rudolph.

“France's CAC 40 did even better and rose by close to 2.4%, buoyed by a near 14% jump in LVMH shares on better-than-expected sales growth and a raised dividend yield.

“Germany's DAX 40 index did less well, though still in positive territory, lost upside momentum as German consumer morale unexpectedly dropped.”

Rudolph added that the Nasdaq 100's “stellar run” was being dampened by disappointing Intel earnings, with the company's share price slipping by around 11%.

“On the commodity markets European natural gas futures tumbled to a six-month low while the price of oil stabilised on end-of-week profit taking after strong weekly gains.”

US inflation reading comes in cooler, UK consumer confidence rises

In economic news, US consumer spending remained resilient as 2023 drew to a close, with price pressures diminishing.

According to the US Department of Commerce, personal consumption expenditures increased 0.3% in December, slightly below the consensus of 0.4%.

Notably, the prior month's increase was revised upwards by two-tenths of a percentage point, reaching 0.4%.

At the same time, personal incomes also rose by 0.3% in December, falling short of the consensus estimate of 0.4%.

On the inflation front, the year-on-year rate of increase in the price deflator for personal consumption expenditures held steady at 2.6%.

However, at the core level, which excludes volatile food and energy prices, PCE inflation dipped from 3.2% to 2.9%, slightly below the consensus of 3.0%.

On home shores, consumer confidence in the UK continued to improve in January, reaching its highest level in two years, according to GfK.

The consumer confidence index climbed three points to -19 in January, with individuals expressing greater optimism about their personal financial situations.

Key metrics revealed that the personal finances index for the past year rose by two points to -12, marking a significant improvement of 19 points compared to January last year.

Additionally, the index for the general economic situation increased three points to -41, reflecting a year-on-year improvement of 30 points.

Expectations for the general economic situation over the next 12 months also showed growth, with a four-point increase to -21, representing a 33-point improvement from the previous year.

“Consumer confidence has started the year well with all measures up - the best since January 2022,” said Joe Staton, client strategy director at GfK.

“Importantly, the view on our personal financial situation for the coming year has gained two points and now stands at zero.

“This is exciting as it ends 24 consecutive months of negative scores for this measure and this significant change is the best single indicator for how the nation’s households feel about their income and expenditure.”

Staton added that despite the cost-of-living crisis still hitting many households across the UK, consumers appeared to be encouraged by the positive news about falling inflation, currently at 4%.

On the continent, Germany faced deepening economic concerns, as a prominent survey unveiled an unexpected decline in consumer confidence due to inflation discouraging major purchases.

The consumer sentiment index plummeted to -29.7 in February, down from a revised -25.4 in January, and notably below the consensus projection of -24.5.

Read-across boosts several shares, Tesco and Sainsbury’s under pressure

On London’s equity markets, Croda International jumped 5.2% on the heels of solid earnings reports from Lonza and Sartorius, both of which saw significant upticks in their stock prices.

Distilling giant Diageo added 5.13% on the back of well-received third-quarter results from French spirits maker Remy Cointreau.

Burberry Group saw a 4.93% rise, benefitting from robust results from Louis Vuitton and Christian Dior owner LVMH.

Over-50s travel and insurance specialist Saga rocketed 6.27% after it announced that it was exploring various options for its cruise business, including potential partnership arrangements.

The move aligned with Saga's strategy to adopt a capital-light business model to foster growth, enhance shareholder value, and reduce debt.

Vodafone Group also saw gains, rising 3.89% despite the initiation of a formal investigation by the UK's competition regulator into its proposed £15bn merger with Three UK.

On the downside, WH Smith slipped 0.65% despite posting an 8% jump in total group revenues for the 20 weeks ended 20 January, highlighting strong performance in its travel business.

Fashion brand Superdry was off 2.61% after it reported a substantial drop in group sales during its first half, along with a pessimistic outlook for the full year due to ongoing challenging trading conditions.

Both J Sainsbury and Tesco were under pressure, declining 1.92% and 1.72%, respectively.

The declines were driven by JPMorgan Cazenove's decision to reduce its price targets on the grocery retailers, expressing caution regarding the UK grocery sector.

Outsourcer Serco Group fell 0.57% after reports that American Industrial Partners (AIP) had contacted it about a potential bid.

While discussions were ongoing, it remained unclear whether AIP had formally proposed a takeover.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,635.09 1.40%
FTSE 250 (MCX) 19,338.02 0.60%
techMARK (TASX) 4,387.90 0.78%

FTSE 100 - Risers

Croda International (CRDA) 4,758.00p 5.29%
Diageo (DGE) 2,849.00p 5.13%
Burberry Group (BRBY) 1,341.50p 4.93%
Vodafone Group (VOD) 70.76p 3.88%
St James's Place (STJ) 670.80p 3.77%
Spirax-Sarco Engineering (SPX) 9,970.00p 3.62%
Anglo American (AAL) 1,887.00p 3.45%
United Utilities Group (UU.) 1,057.50p 3.07%
Rentokil Initial (RTO) 404.00p 2.93%
Prudential (PRU) 858.20p 2.88%

FTSE 100 - Fallers

Centrica (CNA) 137.65p -4.58%
SSE (SSE) 1,698.00p -2.36%
Sainsbury (J) (SBRY) 276.00p -1.92%
Tesco (TSCO) 293.50p -1.77%
Marks & Spencer Group (MKS) 255.90p -1.73%
BAE Systems (BA.) 1,168.00p -1.18%
International Consolidated Airlines Group SA (CDI) (IAG) 154.05p -0.58%
Endeavour Mining (EDV) 1,426.00p -0.49%
Rolls-Royce Holdings (RR.) 305.40p -0.36%
CRH (CDI) (CRH) 5,506.00p -0.25%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 2,050.00p 5.32%
Victrex plc (VCT) 1,392.00p 4.66%
Dr. Martens (DOCS) 87.60p 4.27%
Essentra (ESNT) 173.00p 4.09%
Spire Healthcare Group (SPI) 238.50p 3.92%
Games Workshop Group (GAW) 9,935.00p 3.33%
OSB Group (OSB) 445.00p 3.30%
Bodycote (BOY) 660.00p 3.12%
Johnson Matthey (JMAT) 1,661.00p 2.98%
Helios Towers (HTWS) 84.50p 2.92%

FTSE 250 - Fallers

Tullow Oil (TLW) 32.42p -6.03%
International Distributions Services (IDS) 278.00p -3.00%
Indivior (INDV) 1,368.00p -2.49%
Drax Group (DRX) 496.30p -2.46%
Trustpilot Group (TRST) 177.30p -2.17%
Bakkavor Group (BAKK) 95.60p -2.05%
Allianz Technology Trust (ATT) 321.00p -1.98%
Octopus Renewables Infrastructure Trust (ORIT) 86.80p -1.81%
W.A.G Payment Solutions (WPS) 89.60p -1.75%
PPHE Hotel Group Ltd (PPH) 1,215.00p -1.62%