FTSE 100 analysis: Blue-chips rise as UK inflation eases – Top UK stocks

FTSE 100 rises as inflation eases

The FTSE 100 is up 0.2% in early trade this morning in wake if the latest inflation data out of the UK, which showed prices rose at a much slower pace in June as the headline figure fell below 8% for the first time in over a year!

We have a speech from the Bank of England’s Dave Ramsden tonight. The remainder of the economic calendar today includes eurozone inflation data out this morning followed by US building permits and housing starts this afternoon, when earnings season will also continue with results due out from big names including electric vehicle maker Tesla, streaming giant Netflix, investment banker Goldman Sachs.

UK inflation rises at slowest pace in over a year

UK inflation rose 0.1% month-on-month in June after slowing from the 0.4% rise we saw in May. That was also a much smaller rise compared to the 0.4% forecast by economists.

That means headline inflation rose 7.9% in June from the year before. That was the slowest increase in over a year after coming down from the 8.7% rise we saw in May. That was below the 8.2% forecast by economists, marking the first time it came in lower than anticipated in five months!

Core inflation was up 6.9% from last year following the 7.1% rise we saw the month before.

That data is being embraced by the markets and suggests inflation, while still too high, eased faster than anticipated as tighter monetary policy starts to show an impact.

FTSE 100 analysis: Where next for the UK 100?

The UK 100, which tracks the performance of the FTSE 100, has surged above the falling trendline that has provided a reliable ceiling over the last three months. The index now needs to climb back above the last peak of 7,550, in-line with the 50-day moving average. From there, a move to 7,650 is possible. The RSI has room for the index to climb further after entering bullish territory.

On the downside, there is a chance that yesterday’s opening price of 7,460 can provide some support going forward considering this is aligned with the support we saw in early June. This must hold to avoid a fall back toward the March lows around 7,300.

Top UK stocks to watch

Aviva is down 0.4% after revealing operating profit rose to £700 million from £661 million in the first half and said it expects the annual figure to rise 5% to 7% from last year as it adjusted its outlook to account for the adoption of IFRS 17. The new rules do not impact its financials or strategy but does impact the timing of when it can book profits from contracts.

Antofagasta is down 3.2% after warning full year copper production will be impacted by the delay of its desalination plant and the expansion of its concentrator. This will mean annual output will be 640,000 to 670,000 tonnes, having previously aimed for 670,000 to 710,000 tonnes. It will also push up costs. The mining company said copper production rose 2.5% year-on-year in the second quarter to 149,600 tonnes thanks to higher throughput at Los Pelambres, while gold output was up 4.3% thanks to higher grades and recoveries at Centinela. Molybdenum production fell 4% to 2,400 tonnes. Production costs fell but net cash costs were up over 27% from the previous quarter because of lower by-product credits from molybdenum.

Rio Tinto is down 0.6%. The miner said it expects iron ore shipments from Pilbara to be at the upper half of its guidance range over the full year. Production and shipments from the project were both up 7% in the first half of 2023 compared to the year before. Copper production was down 1% but Rio Tinto said the ramp-up of the Oyu Tolgoi mine in Mongolia ‘progressed ahead of plan’, with the project set to triple copper output by the end of this decade!

National Grid is up 0.2% after agreeing to sell another 20% stake in its UK gas transmission and metering business to a consortium of infrastructure investors led by Macquarie Asset Management for around £700 million. It completed the sale of a 60% stake in January and today’s deal will mean National Grid has sold an 80% stake. Notably, the consortium has the option to buy the last 20% interest between the start of May 2024 and the end of July 2024.

Severn Trent is up 0.5% at 2,466p today after performing as expected since the start of the financial year as it revealed it has become the first water company to ern a 4-star environmental performance assessment from the Environment Agency for four consecutive years. It said it remains on track to deliver at least £50 million in customer outcome delivery incentives and said capital expenditure should be between £850 million to £1 billion this year as it ramps-up capacity ahead of the next regulatory window. Severn Trent was downgraded to Hold by SocGen this morning and given a 2,630 price target.

Woodside Energy is down 0.6% after revealing production was 5% lower in the second quarter compared to the first because of maintenance work, but left its full year guidance unchanged. That, twinned with lower prices, resulted in revenue falling 29% sequentially to $3.08 billion. ‘Whilst production and sales were lower compared with the first quarter of 2023, they were higher than the corresponding period last year, reflecting Woodside's expanded operations portfolio,’ said the company.

Finsbury Food Group is down 1.3% this morning. It announced annual sales rose 16% in the year to the start of July to £413.7 million. That was boosted by its acquisition of Lees Foods, with the figure rising 12.6% when this was excluded. Its UK bakery arm reported a 14.5% rise in sales while its overseas division posted stronger growth of 25%. It said this performance came against a backdrop of significant cost inflation and an uncertain economic outlook. ‘The record revenue performance, which is in line with market expectations, that we have delivered this year is testament to the ongoing demand for our products and the resilience and determination of the business,’ said CEO John Duffy.

Revolution Beauty is up 1.6% after it said it hopes to have its financial accounts audited by the end of August after striking a deal with shareholder Boohoo yesterday that has seen its shake-up its board. It has now appointed new board members, some from Boohoo, while ousting others and said it hopes to release financial results in ‘late September or early October’.

Aston Martin has been upgraded to Buy by Goldman Sachs, which has a 413p price target on the luxury carmaker. The company is up 5.1% at 347.8p today.

Segro has been upgraded to Outperform by BNP Exane, which has a 900p price target on the stock. The real estate firm is up 5.7% at 785.4p.

Computacenter has been rated as New Overweight at JPMorgan, which has a 2,700p price target on the firm. The tech and IT services provider is up 6.1% at 2,268.70p.

Pennon Group has been raised to Buy at SocGen and given a 890p price target. The water utility is up 2.6% at 729.5p in early trade.