London midday: FTSE erases losses as inflation falls below target

18th Feb 2014 11:27

- UK inflation falls to 1.9 per cent- ZEW reports unexpected decline in both Eurozone and German confidence- BRC publishes plans to reform the UK business rates system techMARK 2,861.72 +0.15%FTSE 100 6,745.04 +0.13%FTSE 250 16,232.79 -0.07%The FTSE was marginally higher by lunchtime today as investors digested a raft of news out from both the UK and abroad. The biggest news was that UK inflation fell below the government's target of 2.0% for the first time after the consumer price index (CPI) hit 1.9% in January. However, as noted by Alpari Market Analyst Craig Erlam, the news did prompt a fall in sterling because declining inflation makes it less likely that the Bank of England will increase interest rates later this year. Erlam explained: "[A rate increase] was something that some analysts have been predicting will happen and that had driven the pound higher. "While [falling inflation] is negative for sterling, it is very good for the UK economy as it means there's less chance of the recovery being choked off by a premature rate hike and it continues to close the gap between wage growth and the cost of living." In other UK macro news, factory gate prices increased by 0.3% over the month (0.9% year-on-year) during January, according to the Office for National Statistics (ONS). The consensus estimate had been for an unchanged reading on the month and 0.7% rise when compared to levels a year ago. Meanwhile, the British Retail Consortium (BRC) has published new plans to reform the UK business rates system based on new measures, saying the current system is "woefully out of date". German ZEW paints a "mixed picture"The main economic sentiment indicator (ESI) fell from January's 61.7 to 55.7, a bigger drop than the consensus expectation of 0.2 and marking the second consecutive monthly fall in investors' optimism about the economy over the next half year. However, the sub-index, which is generally more closely related to gross domestic product (GDP) growth, again rose in February from 41.2 to 50, its highest level since August 2011. According to Paul Hollingsworth, Assistant Economist at Capital Economics, the survey gave "mixed signals, suggesting that whilst the economic situation is improving slowly, investors are losing some optimism about the future". He added that based on past figures, the sub-index reading "would be consistent with annual GDP growth of over 2%".The European research firm reported that Eurozone economic sentiment had fallen to 68.5 in February from the prior reading of 73.3. Consensus had expected an increase to 73.9.InterContinental Hotels disappoints despite higher revenueInterContinental Hotels was the morning's big faller despite posting a 3.7% rise in 2013 revenue to $1.9bn. However, as noted by broker Investec, there was a negative impact on earnings before interest and tax as a result of hotel/room closures during refurbishments, while 2014 capex guidance was more than 20% ahead of its current forecast. Significantly, there is a potential delay to further cash returns. Centrica shares also declined heavily after Deutsche Bank reduced its target price on the stock from 315p to 300p, with a 'hold' rating. Randgold Resources fell after the group said results from the drilling programme on the Baraboye and Ibel prospects did not justify an immediate follow-up programme. As such the group is moving its focus to exploration activities on the Gangara and Bandafassi prospects where it plans to identify additional drill targets. Meanwhile, BHP Billiton rose after it reported a 15% increase in interim underlying operating profits, in terms of earnings before interest and taxes (EBIT), to reach $12.4bn. Underlying attributable profit rose by 31% to reach $7.8bn. Whitbread also registered decent gains after it reportedly signed a deal with hotel chain Action to expand its Premier Inn franchise in the Middle East. FTSE 100 - RisersRoyal Bank of Scotland Group (RBS) 359.80p +2.27%BHP Billiton (BLT) 1,941.50p +1.54%Barclays (BARC) 260.00p +1.54%Whitbread (WTB) 4,185.00p +1.48%Travis Perkins (TPK) 1,926.00p +1.21%Tullow Oil (TLW) 779.00p +1.17%BT Group (BT.A) 408.80p +1.11%Petrofac Ltd. (PFC) 1,332.00p +1.06%Persimmon (PSN) 1,430.00p +1.06%Standard Chartered (STAN) 1,321.50p +1.03%FTSE 100 - FallersInterContinental Hotels Group (IHG) 1,972.00p -3.66%Centrica (CNA) 310.60p -2.45%Tate & Lyle (TATE) 645.00p -1.75%Legal & General Group (LGEN) 237.70p -1.74%G4S (GFS) 231.40p -1.32%Randgold Resources Ltd. (RRS) 4,793.00p -1.32%Rolls-Royce Holdings (RR.) 993.00p -1.29%CRH (CRH) 1,626.00p -1.22%Morrison (Wm) Supermarkets (MRW) 233.60p -1.18%Sports Direct International (SPD) 712.50p -1.18%FTSE 250 - RisersBwin.party Digital Entertainment (BPTY) 119.10p +5.40%Wood Group (John) (WG.) 706.00p +4.36%Bank of Georgia Holdings (BGEO) 2,354.00p +3.79%Paragon Group Of Companies (PAG) 380.00p +3.43%Fidessa Group (FDSA) 2,377.00p +2.90%Big Yellow Group (BYG) 540.50p +1.69%Jupiter Fund Management (JUP) 399.40p +1.65%Imagination Technologies Group (IMG) 184.10p +1.54%DCC (DCC) 2,960.00p +1.44%Daejan Holdings (DJAN) 4,946.00p +1.44%FTSE 250 - FallersPolymetal International (POLY) 658.00p -3.80%African Barrick Gold (ABG) 268.70p -2.82%Millennium & Copthorne Hotels (MLC) 569.50p -2.23%Kazakhmys (KAZ) 232.40p -2.19%Afren (AFR) 148.30p -2.05%Vedanta Resources (VED) 918.00p -1.98%Cairn Energy (CNE) 190.80p -1.95%Kenmare Resources (KMR) 16.38p -1.92%Unite Group (UTG) 432.20p -1.79%Ferrexpo (FXPO) 168.70p -1.69%NR