Inflation rose to 2.3 percent in May 2018, according to the latest figures from the Office for National Statistics, up from 2.2 percent in April.
The figure came in a little under economists’ expectations, with forecasts coming in at 2.5 percent. A weaker inflation rate than expected will lend weight to the Bank of England’s decision not to raise interest rates, which was decided at the last monthly meeting.
Rising motor fuel prices were one of the largest upward contributions to the change in the rate between April and May 2018, with increases also from air and sea fares which had been influenced by the timing of Easter.
Partially offsetting downward effects came from price changes for games, domestic electricity, food and non-alcoholic beverages, and furniture and furnishings.
The FTSE 100 opened down on Wednesday morning, ahead of the a rate decision by the US Federal Reserve and the release of UK inflation figures.
The FTSE is currently down 11 percent at 7,695.21, with other EU markets also seeing a slow start to the day. The German DAX index is down 0.17 percent at 12,821.10, with Spain’s IBEX 35 down 0.63 percent at 9,852.30 (0936GMT).
Fiona Cincotta, Senior Market Analyst at City Index, commented:
“The FTSE 100 opened a touch lower as focus shifted from this week’s historic summit between Donald Trump and the North Korean president onto key central bank interest rate meetings which are due to yield rate decisions and potentially a winding down of the easy money supply in Europe.”
The FTSE’s biggest risers are Evraz plc (LON:EVR), up 2.65 percent, followed by Johnson Matthey (LON:JMAT) and mining company Glencore (LON:GLEN).
The biggest fallers this morning are Just Eat (LON:JE), who have been hit by big expansion plans from competitor Deliveroo and are trading down 7.88 percent, BT Group )LON:BT.A) and Fresnillo (LON:FRES).
Components supplier Dewhurst (LON:DWHT) suffered from both falling sales and profit in the half year to March, sending shares plummeting at market open.
Profit before tax fell 4 percent to £2.8 million, down from £3 million this time last year, with revenue taking a 5 percent hit to land at £24.7 million. Operating profit also fell 19 percent to £2.5 million, with the company warning that the slump may well continue into the second half.
A strong pound was largely responsible for the fall, as well as a lack of demand for keypads, one of its key sales drivers.
“Although keypad sales have picked up a little in the last couple of months we do expect a declining trend on these products over the long term,” the company said.
“The second half may see a period of consolidation, but on balance we are encouraged by the future growth prospects for the group,” the company added.
The group maintained its interim dividend at 3.5 pence. Shares in Dewhurst are currently trading down 14.44 percent at 800.00 (0920GMT).
Shares in Toshiba (TYO:6502) jumped on Wednesday on the announcement of a share buyback plan worth around 700 billion yen.
The share buyback was designed to fulfill the promise made to its investors to share some of the profits made from the $18 billion sale of its memory chip business.
The group finalised the sale of the memory business to a consortium led by Bain Capital earlier this month. The deal came as a relief to investors, after financial struggles driven by the doomed Westinghouse nuclear business meant the company came close to delisting.
The scale of the buyback exceeds what some in the market expected, which was around 600 billion yen. The timing of the announcement is earlier than we had expected, so the first impression is positive,” Mizuho Securities analyst Takeshi Tanaka said in a note to clients.
Shares rose around 11 percent when the news was released, and are currently trading up 6.65 percent at 337JPY (0901GMT).
Dixons Carphone (LON:DC) shares plummeted over 4 percent at market open on Wednesday, after admitting to a huge data breach affecting 1.2 million people.
Hackers “attempted to compromise” 5.9 million payment cards, but Dixons Carphone said only 105,000 cards without chip-and-pin protection had been leaked.
The group added that there was no evidence that any of the cards had been used fraudulently following the breach, but chief executive Alex Baldock said it was “extremely disappointed” by the data breach and “sorry for any upset”.
“The protection of our data has to be at the heart of our business, and we’ve fallen short here.
“We’ve taken action to close off this unauthorised access and though we have currently no evidence of fraud as a result of these incidents, we are taking this extremely seriously,” he added.
The news comes as a further blow to Dixons Carphone investors, just a month after it warned that it had been affected by the tough market conditions and said it may suffer a sharp fall in profits.
Shares in the company are currently trading down 4.12 percent at 189.60 (0842GMT).
Waste management company Biffa reported a 33 percent rise in profit on Wednesday, alongside the announcement that CEO Ian Wakelin would be stepping down.
Underlying after tax profit rose 33.8 percent to £47.9 million, with net revenue jumping 8.8 percent to £977.7 million. Underlying earnings rose 8.9 percent to £150 million, with underlying operating profit rose 10 percent to £81.2 million.
CEO Ian Wakelin also announced that he would be stepping down from his position, to be replaced by CFO Michael Topham.
Wakelin said: “I have thoroughly enjoyed the last eight years and will leave satisfied that we have achieved a great deal including successfully bringing the business back to the stock market.
“I would like to thank all of my colleagues across the business for their support and commitment over the years. Biffa is a great business with a great future ahead of it.”
Shares in Biffa (LON:BIFF) are currently trading down 0.83 percent at 239.50 (0823GMT).
British accessories brand Mulberry reported a fall in UK sales in the 10 weeks to June, but announced a new move into South Korea designed to take advantage of the Asian market.
Pre-tax profit fell 8 percent to £7.5 million, mainly linked to the startup costs of the group’s expansion in Asia, with revenue rising 1 percent to £169.7 million. Without these costs, pre-tax profit from existing business rose 36 percent to £11.3 million.
The UK market remained week, with the group reporting a 9 percent fall in sales on the back of “lower footfall and fewer tourists, as more widely reported”.
“We have made significant progress during the year on our international strategy, creating new Mulberry subsidiaries in China, Hong Kong, Taiwan and Japan,” chief executive chief executive Thierry Andretta said.
The group then announced its decision to merge with SHK in Korea to create Mulberry Korea.
“Our international business is growing and following the completion of this set up phase in Asia, we will focus on omni-channel, digital partnerships and marketing investment in the region.”
“Although the UK market remains challenging, we will continue to invest in our strategy to develop Mulberry into a global luxury brand to deliver increased shareholder value.”
Mulberry will own 60 per cent of the share capital of the newly created entity, with SHK owning the remaining 40 per cent stake, and it is expected to start trading by autumn of this year.
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UK wage growth has unexpectedly slipped to 2.8 percent, falling short of analyst expectations.
The Office for National Statistics has reported the 0.1 percent fall for the first three months in April despite unemployment falling to 1.42 million.
Economists had predicted a steady wage growth for the three months to April
The decline in wage growth has raised doubts over whether the Bank of England plans to raise interest rates over the coming summer.
The Bank of England has previously suggested that it will raise rates this year if the economy bounces back as it has expected.
The hike is increasingly unexpected following the slowing wage growth and poor manufacturing data for April.
Howard Archer of the EY Item Club said: “Strong employment but softer earnings growth will likely keep uncertainty high about the prospects of an August interest rate hike by the Bank of England.”
“We suspect that there is an increased chance that the Bank of England will hold fire on interest rates until November given that the MPC wants to see clear, sustained evidence that the UK economy has improved from its first quarter relapse before hiking,” he added.
The Bank of England remains optimistic and is expecting wage growth to pick up and reach 3.5 percent by the end of 2020.
“Wage growth is stuck in the slow lane. At this rate pay packets won’t recover to their pre-recession levels for years,” Frances O’Grady, the TUC’s General Secretary.
“We need to speed things up. Extending collective bargaining would boost living standards and help workers get a fairer share of the wealth they create.”
The slowing wage growth is partly due to the lack of investment in new machinery and technology since the financial crisis and the public sector pay freeze followed by the 1 percent pay cap.
The FTSE 100 opened higher on Tuesday morning, before sinking to trade down around 0.20 percent.
This is in contrast to European markets, which have broadly had a positive start to the day, with the DAX Index up 0.15 percent and the IBEX up 0.066 percent.
Fiona Cincotta, Senior Market Analyst at City Index, commented:
“The FTSE opened higher but quickly started losing ground in early trade with Admiral Group, Barratt Development and Anglo American leading the way lower.
“In contrast, European markets were on the rise benefiting from a major divestment by the French hotel chain Casino and plans by food retailer Carrefour to work with Google on online shopping plans.”
The event on everyone’s lips is the meeting between President Trump and Kim Jong-Un, a hotly anticipated event after months of tension between the two leaders.
“The long-awaited meeting between President Trump and North Korean leader Kim Jong Un ended up on a positive note with the two heads of state signing a document committing to the complete removal of nuclear weapons from the Korean peninsula. The agreement could pave the way for the opening up of the country to the rest of the world and building of new business and trade links in Asia”, Cincotta said.
Retail shares
Retailers had a surprisingly strong morning on Tuesday, with Marks & Spencer, Burberry, Kingfisher and Primark-owner ABP trading up around 1 percent in early trading.
But Aim-listed online retailer Boohoo reported a strong set of results, but shares fell 4 percent after the results were not quite as high as anticipated by investors.
Centrica (LON:CNA), Evaz (LON:EVR) and Reckitt Benckiser (LON:RB.) were the biggest risers on the FTSE 100, with Barratt Developments (LON:BDEV), Berkeley Group Holdings (LON:BKG) and Persimmon (LON:PSN) being the biggest fallers.
ONS employment figures
The latest employment figures from the Office for National Statistics came as a pleasant surprise on Tuesday, recording 32.39 million people in work in the February-to-April period. This is 146,000 more than the previous quarter, and 440,000 more than in the same period a year earlier.
However, wages continued to grow slowly in the three months to April, with average earnings – excluding bonuses – up by 2.8 percent. This is lower than the 2.9 percent growth rate between January to March.
