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(Alliance News) - The UK inflation rate raced to 9.4% in June, figures on Wednesday showed, beating market forecasts and hitting a series high.
The annual pace of price increases accelerated from 9.1% in May and also topped FXStreet-cited market consensus of 9.3%.
According to the Office for National Statistics, the June reading was the hottest annual inflation rate in its latest series, which began in 1997. Inflation was last this high in 1982, the ONS added.
A year earlier, the inflation rate was 2.5%. There has been an acceleration in annual inflation every month since last October.
On a monthly basis, consumer prices rose 0.8% in June, picking up pace from 0.7% in May.
Meanwhile, factory gate inflation also hotted up.
Producer input prices surged 24% annually in June, accelerating from 22% in May and setting the highest figure since records began in January 1985.
Producer output prices rose 17% yearly in June, picking up from 16% in May. June's annual inflation figure was the highest rate since September 1977.
The latest inflation readings put the Bank of England under the spotlight.
Governor Andrew Bailey on Tuesday mooted a possible 50 basis point interest rate hike next month.
At the annual Mansion House speech in the City of London on Tuesday, Bailey said a 50 basis point rise – from 1.25% to 1.75% – would be one of the options for the Monetary Policy Committee.
So far, the UK central bank has opted for smaller interest rate rises, although some of the MPC members have argued for quicker rate rises.
"A 50 basis point increase will be among the choices on the table when we next meet," Bailey said, adding: "50 basis points is not locked in, and anyone who predicts that is doing so based on their own view."
ING said that despite signs that core UK inflation has peaked, it still expects a 50-point hike at the next BoE policy meeting, which is early next month.
"Rising petrol prices took UK headline inflation another leg higher in June, and we expect it to peak above 11% in October. But core inflation may have already peaked, and that means today's numbers are unlikely to change too many minds when it comes to August's Bank of England decision," said James Smith, developed markets economist at the Dutch bank.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.6% at 7,342.43
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Hang Seng: up 1.5% at 20,959.74
Nikkei 225: closed up 2.7% at 27,680.26
S&P/ASX 200: closed up 1.7% at 6,759.20
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DJIA: closed up 754.44 points, or 2.4%, at 31,827.05
S&P 500: closed up 105.84 points, or 2.8%, at 3,936.69
Nasdaq Composite: closed up 353.10 points, or 3.1%, at 11,713.15
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EUR: flat at USD1.0249 (USD1.0245)
GBP: down at USD1.2007 (USD1.2030)
USD: up at JPY138.07 (JPY137.77)
Gold: down at USD1,707.02 per ounce (USD1,714.05)
Oil (Brent): up at USD106.04 a barrel (USD105.85)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's key economic events still to come
1000 CEST EU euro area balance of payments
1600 CEST EU flash consumer confidence indicator
0930 BST UK ONS house price index
1030 EDT US EIA weekly petroleum status report
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High temperatures have brought severe disruption to rail services in the UK. Dozens of trains were cancelled or delayed across England on Wednesday morning because of problems caused by the extreme heat. Temperatures hit 40C on Tuesday, the hottest on record in the UK, causing damage to overhead wires, tracks, and signalling systems. National Rail has told customers to check before setting off on their journeys and to only travel if absolutely necessary.
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The European Commission is set on Wednesday to publish an emergency plan to secure the bloc's gas supplies and avoid a winter crisis amid fears of a total shut-off of Russian deliveries. In the draft plan, subject to change, the commission urges EU member states to continue voluntary measures to reduce gas consumption to avoid a crisis situation. However should two or more EU member states fear an emergency situation due to low supplies, "a binding gas demand reduction target would be implemented," the draft contingency plan states.
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BROKER RATING CHANGES
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Bernstein starts Aston Martin with 'market-perform' - price target 460 pence
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JPMorgan starts Haleon with 'underweight' - price target 280 pence
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Goldman Sachs starts Haleon with 'buy' - price target 350 pence
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COMPANIES - FTSE 100
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Miner Antofagasta said copper output in the second quarter of the year fell 6.5% quarter-on-quarter to 129,800 tonnes. For the half-year, it was 26% lower year-on-year at 268,000 tonnes. A leak at the Los Pelambres asset in Chile hit output. Copper output guidance for 2022 has been lowered to between 640,000 and 660,000 tonnes, from the previous range of 660,000 tonnes to 690,000 tonnes. "This revision mainly reflects the impact of the pipeline incident and the continued uncertainty arising from the water shortage at Los Pelambres. The drought has continued at Los Pelambres during the period, although there has been heavier precipitation in July. The revised guidance range incorporates a low probability negative outlook for water availability for the rest of the year. Strict water management protocols remain in place to optimise water usage and mitigate the impact of low water availability," Antofagasta explained. It also noted weaker copper prices, which have been on a downward trend since June. Chief Executive Ivan Arriagada said: "The significant decline in the copper price since the beginning of June has reinforced our commitment to control costs, particularly during this period of higher input prices and general inflation."
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abrdn is preparing to sell its private equity arm as part of its ongoing streamlining process, Sky News reported. abrdn has hired investment bankers to find a buyer for the division which manages roughly GBP14 billion in private equity asset, Sky said. Rothschild has been appointed to oversee the process, Sky said, citing unnamed sources. The sale represents the latest phase of a reshaping of the Edinburgh-based investment company which has been gathering pace under Chief Executive Officer Stephen Bird, who joined the company then known as Standard Life Aberdeen two years ago. abrdn's sale of its private equity funds business is expected to take several months.
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COMPANIES - FTSE 250
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Postal service Royal Mail has announced a name change and mooted a possible separation should its core letters arm see no "significant change". Royal Mail said revenue in its core unit during the first quarter ended June was 12% lower year-on-year. Revenue in the eponymous Royal Mail unit in the UK was hit by "weakening retail trends, lower [Covid-19] test kit volumes and a return to structural decline in letters".The domestic unit suffered an adjusted operating loss of GBP92 million. At GLS, the company's Amsterdam-based logistics arm, volumes fell 3% annually, though revenue was up 7.8% in sterling terms, or 9.8% in euros. There could be wholesale changes afoot at group level. The London listing has announced a name change to International Distributions Services PLC, to reflect the "increased importance" of GLS at group level. There also could be a separation, should the Royal Mail arm continue to be a laggard. "The board has always maintained that there should be no cross subsidy in the group and recognises the need to address improvements in Royal Mail's performance quickly. In the event that significant change within Royal Mail is not achieved, the board will consider all options to protect the value and prospects of the group, including separation of the two companies," the company said.
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COMPANIES - SMALL CAP
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Car dealer Pendragon backed annual guidance after "another strong performance" in the first half. It expects underlying pretax profit of GBP33 million for the half-year ended June 30, down 6.0% from GBP35.1 million a year earlier. Pendragon noted it faced some cost pressures during the half. Marketing costs amounted to around GBP7 million, and the firm also took a hit from the removal of GBP8.3 million worth of government support. "The increase in UK Motor gross profits, combined with a strong performance in the leasing business, were offset by an increase in underlying operating costs of approximately GBP20 million," Pendragon explained. Volumes for new cars were weaker during the period, due to industry supply constraints. New car volumes in the wider market were down 12%. Pendragon said it continues to expects 2022 underlying profit before tax in line with internal expectations.
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COMPANIES - GLOBAL
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China is preparing to hit ride-hailing firm Didi with a fine of more than USD1 billion to wrap up a long-running probe, a press report said, boosting investor hopes that the country's tech crackdown is winding down. Didi, once known as China's answer to Uber, has been one of the highest-profile targets of the widespread clampdown on the sector, which saw years of runaway growth and supersized monopolies before regulators stepped in. The fine – imposed over Didi's cybersecurity practices – would amount to more than 4% of its USD27.3 billion total revenue last year and pave the way for its new share listing in Hong Kong, The Wall Street Journal reported. Citing unnamed sources familiar with the matter, the Journal said that once the fine is announced, the government will ease its restrictions on Didi's operations. The firm was prevented from adding new users and its apps were removed from online stores in China by regulators.
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Wednesday's shareholder meetings
ADM Energy PLC - AGM
Alkemy Capital Investments PLC - AGM
DeepVerge PLC - AGM
easyJet PLC - GM re purchase of Airbus jets
Fidelity China Special Situations PLC - AGM
HarbourVest Global Private Equity Ltd - AGM
HICL Infrastructure PLC - AGM
Novacyt SA - AGM
Plaza Centers NV - AGM
Premier Foods PLC - AGM
Royal Mail PLC - AGM
Triad Group PLC - AGM
Wynnstay Properties PLC - AGM and GM re share buyback
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By Tom Waite; thomaslwaite@alliancenews.com
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