(Alliance News) - The UK annual inflation figure hit its highest level since March 1992 as the country grapples with a cost of living crisis, data from the Office for National Statistics showed on Wednesday.
On an annual basis, the UK consumer price index rose by 6.2% in February, accelerating sharply from a 5.5% rise in January. The reading was higher than the market forecast, cited by FXStreet, of 5.9%.
UK CPI rose 0.8% monthly in February, having edged down 0.1% in January. The print exceeded the consensus estimate for a rise of 0.6%.
The ONS noted that UK inflation has risen sharply in recent months, driven by a broad range of items, with particular pressure coming from food, durables, consumer goods and energy.
The Bank of England raised interest rates for the third meeting in a row last week, as widely expected, in a bid to tame inflation.
However, the annual inflation rate remains well above the Bank of England's 2.0% target, as UK Chancellor of the Exchequer Rishi Sunak faces increasing pressure to take action over the country's cost of living squeeze.
The chancellor will present the latest updates from the Office for Budget Responsibility on the state of the UK economy and public finances as part of the spring statement later on Wednesday.
"The big concern is that things are likely to get worse before they get better, commented Matthew Ryan, senior market analyst at financial services firm Ebury.
"The Bank of England expects inflation to exceed 8% in Q2, although even this may be a slightly conservative estimate given the removal of the government's energy price cap in April and boom in global commodity prices triggered by Russia's invasion of Ukraine.
"This march higher in prices creates a very delicate balancing act for policymakers at the BoE. A logical assumption would be for the MPC to raise interest rates aggressively this year, although should they deem higher rates as an ineffective tool against rising energy prices, a pause in the hiking cycle may be needed in order to support the growth outlook."
Separately, the ONS on Wednesday said producer prices accelerated in February. On an annual basis, the UK producer price index rose 10% in February, ticking up slightly from a 9.9% rise in January. The figure was in line with the market forecast.
The pound was firm following the inflation data.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 7,494.58
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Hang Seng: up 1.3% at 22,171.03
Nikkei 225: closed up 3.0% at 28,040.16
S&P/ASX 200: closed up 0.5% at 7,377.90
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DJIA: closed up 254.47 points, or 0.7%, at 34,807.46
S&P 500: closed up 1.1% at 4,511.61
Nasdaq Composite: closed up 2.0% at 14,108.82
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EUR: firm at USD1.1023 (USD1.1014)
GBP: firm at USD1.3262 (USD1.3255)
USD: up at JPY121.07 (JPY120.55)
GOLD: down at USD1,919.75 per ounce (USD1,922.93)
OIL (Brent): up at USD116.34 a barrel (USD115.05)
(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
Germany G7 trade ministers meeting
1000 CET Germany Ifo economic forecast spring report
1600 CET EU FCCI flash consumer confidence indicator
0930 GMT UK house price index
1230 GMT UK Chancellor Sunak's spring statement
1000 EDT US new residential sales
1030 EDT US EIA weekly petroleum status report
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Pressure is building on UK Chancellor Rishi Sunak to unveil new plans to help struggling households as he is set to vow to "stand by" British families amid the deepening cost of living crisis. Sunak, who will deliver his spring statement on Wednesday around midday, will link strengthening the UK economy to opposing Russian President Vladimir Putin's invasion of Ukraine. Beyond rhetoric on the Kremlin, Sunak will be forced to address a crisis at home – with Labour dubbing him the "high-tax chancellor" and the Federation of Small Businesses urging him to provide more help. It has been suggested Sunak may look to ease the burden on the taxpayer by cutting fuel duty and raising the income threshold at which people begin to pay national insurance.
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US President Joe Biden leaves Wednesday for Europe on a mission to bolster Western unity, ramp up unprecedented sanctions against Russia over its invasion of Ukraine and attempt to upset the post-Cold War balance of power. The conflict with Russian President Putin is redefining Biden's 14-month old presidency as he pivots from domestic woes to leading the transatlantic alliance in the most serious crisis in Europe for decades. After four years of Donald Trump, who treated European nations as economic competitors and scorned the traditional US role as senior partner in NATO, Biden has put the accent on unity. At back-to-back summits in Brussels on Thursday, he'll be pushing for more. White House National Security Advisor Jake Sullivan told reporters that Biden will seek to "reinforce the incredible unity we built with allies and partners". Sullivan also said that economic sanctions, imposed by a global network of Western allies to cripple Russia's finances, will be deepened.
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BROKER RATING CHANGES
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Morgan Stanley raises BP to 'overweight' (equal-weight) - price target 490 (465) pence
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Jefferies cuts Reckitt Benckiser to 'underperform' (hold)
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HSBC cuts Beazley to 'hold' (buy) - price target 480 (610) pence
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SocGen initiates Watches of Switzerland with 'buy' - target 1,430 pence
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COMPANIES - FTSE 100
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Hazard detection and life protection firm Halma said it expects annual adjusted pretax profit to be in line with forecasts. Halma said it has made good progress so far in the second half of the financial year that ended March 31. It said it continues to benefit from a diverse portfolio and long-term growth drivers. Halma expects adjusted pretax profit for the year to be in line with market consensus expectations. Halma expects to deliver a sequential improvement in revenue in the second half of the year and substantial revenue growth in the year as a whole. Order intake has continued to be ahead of both revenue this year and order intake for the same period last year, it added.
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COMPANIES - FTSE 250
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Defence contractor Ultra Electronics said 2021 was a year of strategic, operational and financial progress, achieved despite pandemic-driven operational and supply challenges. Ultra is in the process of being acquired by private equity-owned Cobham, but the deal is being probed by the UK government on national security grounds. For 2021, pretax profit was GBP82.7 million, down from GBP103.7 million in 2020, due to a one-off loss on disposal of two small loss-making non-core businesses. Revenue for 2021 was GBP850.7 million, down from GBP859.8 million. Citing the terms of the recommended cash acquisition of Ultra by Cobham, it said no final dividend will be paid and the total full-year dividend is unchanged from the interim dividend of 16.2 pence. This compares with 56.9p paid out in 2020. Looking ahead, Ultra Electronics said it is well-placed to deliver its target of above market growth and a mid-teens margin. "The board remains committed to working with Advent/Cobham and HM government to deliver a successful closing of the acquisition," Chief Executive Officer Simon Pryce said.
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COMPANIES - MAIN MARKET AND AIM
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Car dealership chain Pendragon said it delivered a strong set of results for 2021 as it benefited from a buoyant used-car market. For 2021, it posted a pretax profit of GBP61.5 million, swinging from a GBP24.7 million loss in 2020, on revenue of GBP3.45 billion, up 18% from GBP2.92 billion in 2020. Pendragon said it delivered record underlying pretax profit of GBP83.0 million, multiplied from GBP8.2 million in 2020. CEO Bill Berman said: "Our sector has experienced a unique set of trading conditions during the period, and I am delighted with how we have performed in this environment. We have made the most of the favourable market dynamics to deliver record underlying profits and we have also reported a return to profit for CarStore, our relaunched, used car brand. "We expect existing supply chain constraints to continue in the current year, and we are mindful of the potential for further disruption to new vehicle supply chains as a result of the conflict in Ukraine. Despite this, we have the right strategy in place and we expect to make positive progress towards our long-term goals this year." Pendragon said underlying profit in January and February was ahead of the same months in 2021.
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COMPANIES - GLOBAL
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Alibaba said it will increase the size of its share repurchase programme by USD10 billion in what the e-commerce firm labelled as a sign that it is bullish about its prospects. Hangzhou-based Alibaba's share buyback programme is now worth USD25 billion, lifted from USD15 billion. The repurchase programme will be effective for two years until March 2024. The chunkier buyback is a "sign of confidence about the company's continued growth in the future", Alibaba said. It comes after Chinese authorities last week Wednesday promised support for beaten-down financial markets.
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Wednesday's shareholder meetings
CML Microsystems PLC - GM re employee share plans
Quartix Technologies PLC - AGM
Strategic Equity Capital PLC - GM re tender offer
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By Tom Waite; thomaslwaite@alliancenews.com
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