London close: Stocks mixed as inflation concerns creep in
By Josh White
Date: Monday 11 Oct 2021
(Sharecast News) - London stocks closed in a mixed state on Monday, with the top-flight index in positive territory, underpinned by a strong performance in the mining sector.
The FTSE 100 ended the session up 0.72% at 7,146.85, while the FTSE 250 was 0.22% weaker at 22,487.47.
Sterling was keeping its head just above the waterline, last trading up 0.01% on the dollar at $1.3616, and advancing 0.03% against the euro to €1.1769.
"The mood in the markets is subdued following the excitement experienced last week," said Equiti Capital market analyst David Madden.
"Traders are sitting on the sidelines today as they still don't know what to make of last Friday's US jobs report.
"The headline non-farm payrolls reading was very disappointing, because only 194,000 jobs were created last month, and that was an enormous miss on the 500,000 that economists were expecting."
Madden added that at the same time, the unemployment rate fell from 5.2% to 4.8%, which was the lowest level since the start of the Covid-19 pandemic.
Earlier in the day, the head of the Bank of England called for further investment in infrastructure in the UK, saying the central bank was going to have a very "challenging job" on its hands when it came to dealing with inflation.
In an interview with the Yorkshire Post, Andrew Bailey said that investment in the UK had been "fairly weak" for some time now and that supporting digital, transport and climate infrastructure would help the economy grow.
The economic recovery had some distance to go but unemployment had likely already topped out, he added.
On inflation, Bailey said that the BoE needed to prevent inflation from becoming embedded, which he said would "obviously be very damaging".
"Obviously I am concerned with inflation above target," he told the newspaper.
"Unfortunately, if you look at our last forecast, it is going to go higher I am afraid. As the Bank of England governor I would prefer it not be there.
"But we are in very unusual times and what I would say is we have to manage our way through these times."
In equities, miners were in the green as metals prices rose, with Anglo American up 5.2%, Antofagasta rising 4.18%, Glencore ahead 3.29%, BHP 3.21% firmer, and Rio Tinto 3.49% higher.
"Lumber, iron ore, coal, and crude are all pushing into long-term highs today, highlighting how the commodities space appears to bring the greatest area of opportunity at a time when markets appear at risk thanks to surging inflation and the potential for a monetary squeeze," said IG market analyst Joshua Mahony.
"Inflation looks like it will be here for some time, and thus the ability to get long physical assets looks an attractive play at a time when traders question the stability of markets.
"It comes as no surprise to see commodity-focused stocks fronting up the FTSE 350 gainers, with the UK FTSE 100 outperforming many of its mainland European counterparts thanks to its strong contingency of mining stocks."
Elsewhere, AstraZeneca nudged up 1.28% after saying that its antibody cocktail to combat Covid-19 had achieved a "statistically significant reduction" in the virus or death in a phase 3 trial.
Investment platform Hargreaves Lansdown gained 4.28% after Morgan Stanley upgraded the shares to 'equalweight' from 'underweight'.
"With UK rates curve further steepening and Bank of England comments suggesting growing hawkishness, we see positive revision risks linked to net interest income," it said.
"Core headwinds around platform and stockbroking pricing, and normalising trading volumes remain, but we move to equalweight in view of near-term rates related upside."
XP Power traded up 3.4% after it said the "strong" momentum in order intake seen in its first half accelerated in the third quarter, with orders up 87% at constant currency, and 73% as reported, to £97.2m
On the downside, drinks maker Britvic was knocked 4.87% lower by a downgrade to 'sector perform' from 'outperform' at RBC Capital Markets.
Supermarket retailers were also under pressure, with Ocado down 3.63% and Tesco losing 1.9%.
Outside the FTSE 350, ASOS shares tumbled 13.41% after the online fashion retailer said in a surprise announcement that chief executive Nick Beighton was stepping down, as it warned over profits.
Market Movers
FTSE 100 (UKX) 7,146.85 0.72%
FTSE 250 (MCX) 22,487.47 -0.22%
techMARK (TASX) 4,543.56 0.26%
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