Highly anticipated US CPI released on Wednesday helped support equities and saw early FTSE 100 losses evaporate as the index turned briefly positive in afternoon trade.
US CPI for April was slightly less than expected at 4.9% compared to economists’ consensus of 5%. April consumer prices also marked a reduction in inflation from March’s 5% read.
Global equities popped higher on hopes the slower inflation rate could mean the Federal Reserve pauses rate hikes in the coming months.
“US CPI came in mostly as expected – although a touch softer at the margin. This should be supportive of equities and a slightly bearish USD for the trading session today as the market breathes a sigh of relief for now,” said Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.
London’s leading index had traded as low as 7,743 earlier in the session before rally to trade positive in the immediate reaction to US CPI. The FTSE 100 was down 13 points at the time of writing. Trade will likely be choppy for the rest of the session.
US stocks started the session on the front foot but gains faded as trade got underway.
With the US debt ceiling limit fast approaching, attention will likely turn to political wrangling in Washington and the prospect of the US government running out of money in early June.
Melrose
Melrose was the FTSE 100’s best performer at the time of writing adding nearly 5% following an upbeat trading update. After recently demerging their automotive unit, Melrose expects revenue for FY2023 between £3.35 billion and £3.45 billion. Adjusted EBITDA is expected to be between £495 million and £515 million.
Investors would have been pleased to hear the Melrose Chief Executive say he expects this to rise further in the coming years.
“Aerospace has huge embedded value and an EBITDA of £1 billion is achievable within the next few years, much of this coming from the premium Engines business,” said Simon Peckham, Chief Executive of Melrose Industries.
“With the new simplified strategy for Melrose announced today, we look forward to explaining the full potential of Aerospace at the upcoming Capital Markets Event next week, including the route to realising this value.”
Melrose’s optimistic forecast for their aerospace unit helped peer Roll Royce rise 2.5% in sympathy.
Admiral was the top faller after Peel Hunt analysts cut their price target from 2,150p to 2,130p.