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Bull Trader USA

London Markets: Pound steady while gilt yields rise after hotter-than-forecast UK inflation data

The pound was steady while bond yields rose Wednesday after the release of faster-than-forecast U.K. inflation data.

Consumer prices rose 5.1% in the 12 months to November, ahead of the 4.8% forecast and a big jump from the 4.2% growth in October. The 5.1% reading also was ahead of the Bank of England’s forecast of 4.5%.

Markets were still hesitant to expect the central bank to lift interest rates from the current level of 0.1% on Thursday. “The reality is that without recent omicron developments, a rate hike would be nailed on at this meeting, given the recent U.K. data flow showing strong inflation and employment numbers. However, even the most hawkish member of the committee in Michael Saunders has sounded more balanced in recent days,” said Jamie Niven, senior fund manager at Candrian Asset Management.

“Our base case is that the [Monetary Policy Committee] will vote to keep the bank rate at 0.1%, adopting a ‘wait and see’ approach unitl more conclusive evidence on the new variant is revealed,” added Ellie Henderson, an economist at Investec.

The pound
GBPUSD,
-0.07%

exchanged hands at $1.3225, drifting lower from $1.3231 on Tuesday as U.S. stocks began to trade.

The yield on the 2-year gilt
TMBMKGB-02Y,
0.479%

rose 6 basis points to 0.495%.

The FTSE 100
UKX,
-0.56%

slipped 0.5% to 7,181.62 in afternoon trade. Rentokil Initial
RTO,
-5.41%

shares dropped for a second day, sliding 5% after announcing Tuesday its planned cash-and-stock offer for Terminix
TMX,
-2.33%
.

International Airlines Group
IAG,
-3.11%

dropped 3% after saying talks were at an advanced stage to terminate the planned acquisition of Air Europa, a deal that had run into antitrust scrutiny due to IAG’s control of Iberia.

DCC
DCC,
+8.54%

shares jumped 8% after reaching a $610 million deal to buy Philadelphia appliance distributor Almo Corp, a specialist sales company with revenue of $1.3 billion in fiscal 2021. DCC said adjusted earnings per share will jump 10% in its first full year of ownership.

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