FTSE 100 Live: UK inflation hits 30-year high at 5.4%, Brent crude oil price rises again

Coursework publisher Pearson and luxury goods business Burberry set a strong pace in the FTSE 100 index after their shares rose 4% on the back of trading updates.

Support from BP and Royal Dutch Shell following the latest rise in oil prices also helped the FTSE 100 to a better-than-expected performance, albeit still 5.96 points lower at 7557.59.

The resilience came amid weakness elsewhere, with Japan's Nikkei 225 index down 2.8% at a five-month low following last night's latest sell-off for Wall Street tech stocks.

Baillie Gifford Japan Trust and JPMorgan Japanese Investment Trust were down by more than 3% in the FTSE 250 index, leaving the second tier 49.20 points lower at 22,603.

WH Smith rose 4% as it said its travel-based stores were well placed ahead of this summer's anticipated recovery in peak trading. The chain also reported that high street stores generated 90% of 2019 revenue levels in December.

The Bank of England's monetary policy committee next meets to discuss interest rates on 3 February, when it will have updated economic projections to hand.

It hasn’t been this far off its inflation target of 2% since it first set it.

The City expects the consumer prices index to spike at 7% in April, higher than the peak of 6% forecast by the Bank when it increased interest rates to 0.25% in December.

Hargreaves Lansdown's personal finance analyst Sarah Coles notes that falling unemployment and record low redundancies make the argument for raising rates far stronger.

She added: “It won’t want to panic borrowers, businesses or investors by raising rates too far or too fast, but it can’t afford for inflation to get out of control either.”

JD WETHERSPOON weighed in to the Number 10 “partygate” scandal today, saying it would not have been a problem if the government had the sense to have kept the pubs open.

Outspoken founder and chairman Tim Martin, a Tory donor and sometime Boris Johnson backer, noted in an update to the City today that:

1) Central London pubs employ experienced staff, including highly trained managers, who would have easily dealt with the “high jinks” alleged to have occurred at No. 10.

2) CCTV is in operation in Central London pubs, so subsequent enquiries as to events are facilitated by the ready availability of evidence.

3) In 2020, before vaccinations were available, Covid controls in pubs were superior to private parties, with screens, sanitisers, optimal seating layouts and so on.

read more here

Rising oil prices pose a fresh headache for airlines just as travel restrictions begin to ease.

Liberum's transport analyst Gerald Khoo notes that fuel prices have more than doubled in the past year, creating short-term pressure on earnings estimates at a time of limited pricing power.

His recommended stocks include easyJet and British Airways owner IAG, based on new price targets of 800p and 200p respectively. Europe-listed Ryanair is also backed, but Khoo has “sell“ recommendations on Air France-KLM and Lufthansa.

He said: “The strong get stronger in crises and are better able to handle higher fuel costs.”

Khoo added: “Injections of private and government capital have kept much of the industry alive. While good for the wider economy and society, the support of excess and economically unviable capacity means the industry faces a protracted recovery.

“However, assuming international travel restrictions continue to ease, with Omicron appearing to be a brief but painful blip, we believe the industry is now on the path to recovery.”

Oil supply concerns following an outage on a pipeline between Iraq andTurkey sent Brent crude futures up for a fourth successive session to more than $88 a barrel today.

The price of Brent was already at its highest level in seven years following an attack earlier in the week by Yemen's Houthi group in the United Arab Emirates.

As the global economic recovery picks up speed and some OPEC+ members struggle to meet their supply targets, there are fears that the price could soon be in three figures.

The cost pressures do little to quell fears over higher interest rates after a downbeat sessions for markets in Europe and the US yesterday.

The S&P 500 fell 1.8%, with a results-day drop of 7% for shares in Goldman Sachs offsetting M&A optimism after Microsoft's deal to buy Activision Blizzard for $68.7 billion.

Wall Street futures point to another decline later today, while CMC Markets expects the FTSE 100 index to open 40 points lower at 7523.

CMC's Michael Hewson said: “There is little doubt that bond markets have driven this move, with tech stocks and other highly valued areas of the market getting sold off heavily.

“The US 2-year yield which is probably most correlated with where market rates are heading moved back above 1% and has risen more than 30 basis points this year alone.”