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MARKET WRAP: FTSE edges higher, GBP steady after CPI hits 30-year high

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Key Points

FTSE 100 closing price of 7,593.44 (+0.4%)
Burberry higher after trading update
WH Smith tops FTSE 250
UK CPI hits 30-year high
GBP steady, EUR/GBP hits lowest since Feb 2020
Crude rally continues
Cryptocurrencies steady

By Samuel Indyk – The FTSE 100 edged higher on Wednesday, supported by positive trading updates from Burberry and Pearson (LON:PSON), while basic materials shares jumped as copper prices continued higher.

Burberry (LON:BRBY) shares were up by as much as 6% as the luxury retailer said Q3 full-price comparable sales were up 26% on pre-pandemic levels. The company said it expects adjusted operating profit for the full year to rise about 35% at constant exchange rates.

Burberry was not the only strong luxury name in Europe on Wednesday. Richemont (LON:0QMU) shares surged in Switzerland after the company said revenue was 38% higher than the same quarter before the pandemic hit. The strong performance lifted other names in the sector, including Watches Of Switzerland (LON:WOSG), Kering (PA:PRTP), and LVMH (PA:LVMH).

WH Smith (LON:SMWH) shares topped the FTSE 250 after the company said revenue for the 20 weeks to 15th January reached 85% of the sales during the same period in 2019. The retailer said it was seeing a “small impact” from Omicron but anticipates a resumption in the recovery of travel in the coming months.

“Strategically the company has remained focused on the longer term and there are some interesting developments that put WH Smith in a stronger place to thrive once life returns to normal,” writes AJ Bell Investment Director Russ Mould. “It has secured more stores in travel hubs, and it is rolling out an initiative whereby it houses a pharmacy within travel shops. If Covid can stop interrupting everyday life, then WH Smith arguably stands a good chance of bouncing back sharply.”

Inflation, as measured by the consumer price index, hit a 30-year high in the UK in December. The Office for National Statistics said the CPI rose 5.4%, more than the expected rise of 5.2%. The higher-than-expected figure increases the likelihood of another rate hike from the Bank of England at its February meeting, according to ING.

“Given the Bank of England has shown itself to be especially worried about elevated rates of CPI, these latest figures will increase the chances of a rate hike in February,” analysts at the Dutch bank said in an emailed note. “Inflation is already comfortably above the rates forecasted by the Bank last November.”

The data gave the GBP a brief push higher with EUR/GBP dropping to its lowest level since February 2020. The ongoing political drama in the UK is, so far, having little impact on the currency, with Prime Minister Boris Johnson facing pressure to resign in the wake of numerous “parties” at 10 Downing Street during the height of social restrictions.

WTI and Brent crude futures continued their recent rally with both benchmarks at their highest since October 2014. An explosion that caused a fire on the Kirkuk-Ceyhan pipeline on Tuesday temporarily cut flow from northern Iraq, however, flows resumed on Wednesday morning. Nevertheless, oil prices remained elevated as the supply picture looks set to remain tight throughout the year.

Major cryptocurrencies were relatively steady as Bitcoin remains within the recent $40,000-$45,000 range.

“Bitcoin appears to have gotten lost in the noise of the last few weeks,” OANDA Senior Market Analyst Craig Erlam said. “It’s floating between support at $40,000 and resistance around $45,000 and showing no signs of breaking either at this point.”


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MARKET WRAP: FTSE edges higher, GBP steady after CPI hits 30-year high

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