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LONDON MARKET OPEN: Pound slips back as UK inflation surges to 9.0%

Stock prices were flat early Wednesday, but the pound took a knock from the report of historically high inflation in the UK.

Consumer prices in the UK shot up in April, setting a 40-year high pace of inflation, official data showed on Wednesday, as pressure continues to mount on the Bank of England to rein in spiralling costs.

The pound was quoted at $1.2411 early Wednesday, down from $1.2465 at the London equities close on Tuesday, though it remains higher against the dollar this week.

The FTSE 100 index was down just 4.17 points at 7,514.18 early Wednesday. The mid-cap FTSE 250 index was up 64.67 points, or 0.3%, at 20,130.26. The AIM All-Share index was up 0.39 of a point at 962.11.

The Cboe UK 100 index was down 0.1% at 748.64. The Cboe 250 was up 0.3% at 17,809.44, and the Cboe Small Companies down 0.1% at 14,768.25.

Versus the prior month, UK consumer prices were up 2.5% in April, accelerating from March's 1.1% rise, but short of market forecasts - according to FXStreet - of a 2.6% month-on-month rise.

Annually, consumer prices jumped 9.0%, accelerating from March's 7.0% rise, but again was slightly behind market expectations of 9.1%.

It was the fastest measured inflation rate since records began in 1989, and the ONS estimates it was the highest since 1982.

Grant Fitzner, chief economist at the ONS, said: ‘Inflation rose steeply in April, driven by the sharp climb in electricity and gas prices as the higher price cap came into effect. Around three-quarters of the increase in the annual rate this month came from utility bills.’

Economists at ING were sanguine about UK inflation. ‘While there are plenty of upside risks to UK inflation, we suspect April's 9% figure will mark the peak,’ the Dutch bank said. ‘Certain goods categories will start to pull down the headline rate, even if further pressure in food and services is yet to come. The key thing for the Bank of England is that inflation is likely to be below target by the end of 2023.’

Kallum Pickering, senior economist at Berenberg, agreed: ‘The 9.0% rise in April consumer prices is in line with the BoE's latest estimate and thus should not change its near-term reaction function or guidance. We continue to expect two more 25 [basis point] hikes this year.’

In Paris, the CAC 40 stock index was up 0.1% and the DAX 40 in Frankfurt was flat.

Still to come Wednesday, there is a eurozone inflation reading at 1000 BST.

The euro was priced at $1.0519, down from $1.0534 on Tuesday evening in London.

On the London Stock Exchange, Burberry advanced 1.3%. The luxury fashion retailer reported annual results in line with market expectations and maintained its outlook for the year ahead.

In the financial year that ended April 2, operating profit rose 4% to £543 million from £521 million. Adjusted operating profit jumped 32% year-on-year to £523 million from £396 million, matching company-compiled market consensus.

Revenue was up 21% to £2.83 billion from £2.34 billion, which was again in line with company-compiled consensus.

Retail comparable store sales were up 18%, with full-price comparable store sales up 24%.

Burberry declared an annual dividend of 47.0 pence, lifted 11% from 42.5p the prior year.

Looking ahead, the fashion retailer maintained its guidance of high single-digit revenue growth.

At the other end of the large caps, Experian shed 4.0%.

The credit checking firm said it had a ‘very good year’ in the 12 months that ended March 31, as revenue rose by 17% to $6.29 billion from $5.37 billion, improving pretax profit by 34% to $1.45 billion from $1.08 billion.

Experian raised its total dividend by 10% to 51.75 US cents from 47.00 cents.

‘For the year ahead, we expect organic revenue growth in the range of 7% to 9%, with modest margin improvement at constant exchange rates, supported by continuing investment behind the execution of our strategy,’ Chief Executive Officer Brian Cassin said.

In the FTSE 250, Premier Foods shares added 4.5%, the best performer in the index, as the food manufacturer reported trading profit ahead of expectations.

For the year ended April 2, pretax profit fell 16% to £102.6 million from £122.8 million, while trading profit was flat at £148.3 million.

Revenue fell 4.9% to £900.5 million from £947.0 million.

Premier Foods upped its dividend to 1.2 pence from 1.0p.

Looking ahead, the Mr Kipling and Angel Delight baker said its trading in the new year has been ‘strong’ and in line with internal expectations.

‘In January, we increased our full year profit guidance, and so it's particularly pleasing that we have exceeded those increased expectations with trading profit up 12% and adjusted pretax profit up 38% compared to two years ago. Yet again, our brands have grown faster than their categories, with revenues increasing nearly 10% versus two years ago as they gained volume and value market share in Grocery and Sweet Treats both instore and online,’ Chief Executive Alex Whitehouse said.

Vesuvius was up 4.4%.

The molten metal flow engineering firm said its sales in the first four months of 2022 have been ‘stronger than expected’.

‘Positive volume growth in our Steel division was supported by market share gains, particularly in Flow Control, across all key regions. Foundry division volumes were broadly in-line with the equivalent period of 2021 as we experienced continued weakness in automotive end markets,’ Vesuvius explained.

Magazine publisher Future gained 1.9% after it made a modest upgrade to its guidance for financial year 2022, on the back of improving margins and the recent acquisition of digital-only women's lifestyle publisher WhoWhatWear.

In the half-year that ended March 31, Future recorded pretax profit of £81.0 million, up 42% from £56.9 million a year before, on a 48% rise in revenue to £404.3 million from £272.6 million.

Adjusted operating margin widened to 33% in the first half from 32% in all of financial 2021.

‘Our strategy is underpinned by our diversified revenues, our global reach and the platform effect we generate,’ said Chief Executive Zillah Byng-Thorne.

In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.9%. In China, the Shanghai Composite ended 0.3% lower, while the Hang Seng index in Hong Kong was up 0.1% in late trade. In Sydney, the S&P/ASX 200 ended up 1.0%.

Japan's economy shrank slightly in the first quarter of 2022, official data showed Wednesday, hit by Covid-19 restrictions and higher prices. The world's third-largest economy shrank 0.2% quarter-on-quarter in the January to March period, slightly less than the market expectations of a 0.4% contraction.

Economists expect Japan's economy to recover again in the April to June quarter now that virus restrictions have been lifted.

Against the yen, the dollar was trading at JP¥129.24, soft from JP¥129.29.

Brent oil was quoted at $113.12 a barrel Wednesday morning, down from $115.10 late Tuesday. Gold stood at $1,816.00 an ounce, lower against $1,820.68.

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