Fuel Contributes to Higher Inflation

123jump.com Staff
12 Feb, 2008
New York City

UK stocks rebounded on the back of rising commodities and energy stocks. The sharp gain in the financial markets in the U.S. and across the Europe helped the UK index. In [[London]] trading FTSE 100 stocks rallied 3.54% or 202.3 to 5,910. ICAP Plc led advancers with a rise of 7.16% followed by Vedanta Resources increasing 6.76% as the price of metal continued to gain on supply constraints that are currently plaguing China.

[R]3:00PM New York, 9:00PM London - UK inflation rises to 2.2% in January. January retail same stores retail sales declined to 2.6% from 3.1% in the same period a year ago.[/R]

Stocks in London recovered from yesterday’s slump on the back of strong gains by commodity and financial stocks despite a government report that showed that inflation in January exceeded the government target.

Market Sentiment

In London trading FTSE 100 stocks rallied 3.54% or 202.3 to 5,910.00.

Of the 102 FTSE 100 stocks 100 gained and 2 were unchanged. ICAP Plc led advancers with a rise of 7.16% followed by Vedanta Resources increasing 6.76% as the price of metal continued to gain on supply constraints that are currently plaguing China.

January Inflation exceeds target

The Office of National Statistics reported today on its website that the country’s CPI annual inflation rose from 2.1% in December to 2.2% in January on rising price of road fuels.

According to the report, average petrol prices rose by 1.3 pence in January to 103.9 pence per liter, compared with a fall of 0.8 pence a year ago. In addition, foodstuffs such as grapes and grapefruit also exerted upward pressures to the inflation figure.

The report also noted that the January furniture piece reductions, which were less than the same period a year ago contributed to the upward movement of the figure. However, clothing and footwear trimmed increases in inflation. Overall, the prices of garments fell by more than last year. RPI inflation rose to 4.1% from 4% in December.

Retail Price index, RPI is a general purpose measure of inflation in the U.K. and continuously measured since 1947. The index is used in revising pension payment, rent rises, and wage bargaining by unions.

RPI was affected by the same factors as those affecting CPI. The statistics office also noted that mortgage interest payments had a downward effect on RPI in January.

RPIX inflation, the all items RPI excluding mortgage interest payments, grew to 3.4%from 3.1% in December.

Retail Sales Fall in January

The British Retail Consortium reported on its website today that U.K retail sales on a like-for like basis rose to 2.65% compared with 3.1% for the previous comparative period a year ago.

The three-month trend rate of growth rose to 1.5% from 0.8% in December for like-for-like sales, and to 3.7% from 2.8% for total sales, reflecting the continuing growth of retail space.

While clothing sales were down from a year ago for the fourth consecutive months, food sales increased after easing in December. Though conditions in the household sector were still difficult home goods and furniture gained marginally. The gain registered in the health and beauty sector was however slow from last year.

Gainers and Losers

Inpex Holdings led gainers in the FTSE 100 stocks with a rise of 8.74% followed by rises in Vedanta Resources of 6.76%, in TUI Travel Plc of 6.42%, in Lonmin of 6.25%, and in Barclays Plc of 6.17%.

Commodity stocks gained on rising metal prices. Copper for three months delivery rose 1.4% to $7,875 a metric ton in afternoon trading in London as output of the commodity remains depressed. Lead for three-month delivery jumped 1.5% to $3,074 a ton. Rio Tinto gained 5.40%, BHP Billiton increased 4.86% and Antofagasta Plc climbed 4.54%.

Energy stocks also gained after crude oil for March Delivery rose 2% yesterday to $93.59.

Admiral Group led decliners in the FTSE 100 stocks with a fall of 1.12%, followed by a drop in British America Tobacco of 0.05%.

Company News

The Financial Times reported today that Xstrata Plc reported that the company has turned down a $76 billion takeover by Brazilian company Cia. Vale do Rio Doce, adding that the company was mulling not to renew its bid.