MARKET WRAP: FTSE heads towards 7,700, US CPI hits almost 40-year high

© Reuters.

Key Points

FTSE 100 closing price of 7,673.9 (+0.4%)
US CPI highest since 1982
US 10-year yield hits 2.0% for the first time since 2019
Informa rallies after unit disposal
AstraZeneca (NASDAQ:AZN) shares higher following results
USD soft despite CPI beat
Oil edges higher
Bitcoin trades above $45,000

By Samuel Indyk

Investing.com – The FTSE 100 finished higher on Thursday on the day that US inflation hit an almost forty-year high.

Consumer prices rose 7.5% in January from a year earlier, the highest since 1982, above the expected forecast of 7.3%. Core CPI, which strips out food and energy components, rose to 6.0%.

The higher inflation has prompted further expectations of even greater tightening from the Federal Reserve this year. According to Investing.com’s Fed Rate Monitor Tool, there is now an almost 50% chance of a 50 basis point interest rate hike at the March meeting. Bear in mind, there is another CPI report released before the Fed’s next confab.

The US 10-Year yield broke above 2.0% for the first time since 2019 in the aftermath of the inflation data.

On a domestic note, Informa (LON:INF) shares were higher after the company announced it was to sell its Pharma Intelligence unit to US private equity firm Warbug Pincus for £1.9 billion. Shares reached their highest level since tumbling at the onset of the pandemic in early 2020.

AstraZeneca (LON:AZN) shares were also higher after the COVID vaccine maker said FY revenue increased 38% to $37.4 billion, with the coronavirus vaccine contributing $4 billion to that total. However, cash profits declined 6% as the company took a $2.2 billion charge related to its acquisition of Alexion (NASDAQ:ALXN).

“There’s a lot riding on the successful integration of Alexion and growth in AstraZeneca’s newly approved drugs like Evusheld,” Hargreaves Lansdown (LON:HRGV) Equity Analyst Laura Hoy said in an emailed note. “Net debt more than doubled in the wake of the acquisition and as interest rates rise, AZN will need sufficient cashflow to pay it down. Astra’s results were undoubtedly positive, but execution risk looms.”

After an initial spike higher following the US inflation data, the USD declined later in the afternoon. The US Dollar Index hit a high of 96.00 before paring gains and turning negative, which helped push GBP/USD back above 1.3600.

WTI and Brent Oil Futures were volatile with a number of factors at play. On the geopolitical front, focus is on the Ukraine/Russia situation. Russia began military drills in Belarus and the Black Sea on Thursday and UK Prime Minister Johnson warned that this is probably the “most dangerous moment”. Meanwhile, discussions between Iran and world powers were ongoing about a potential resumption of the 2015 nuclear deal which could see sanctions lifted on Iranian oil exports. Further clouding the situation is the supply picture. US inventories declined by 4.8 million barrels in the latest week, while OPEC is struggling to ramp up production. In total, the 13 members of the cartel pumped 27.981 million barrels of oil per day in January, up just 64,000 bpd from the prior month, according to the group’s latest monthly oil market report.

Bitcoin broke back above $45,000 for the first time since Tuesday. On a technical level, a hold above the $45,000 could be the next catalyst for a resumption higher and a test of the $50,000 level.

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