BUSINESS LIVE: Inflation rises to 4%; BP confirms Auchincloss as CEO; GSK sells Haleon stake

Market expectations that the Bank of England will begin to cut base rate soon are fading after fresh data showed a surprise jump in inflation last month.

Consumer price inflation rose for the first time in 10 months in December,

climbing from 3.9 to 4 per cent, fresh data from the Office for National Statistics showed on Wednesday.

This disappointed against forecasts of a fall to 3.8 per cent and has dented rate cut hopes.

Sterling fell against the US dollar in early trading, as two and five-year gilt yields jumped by double digits and the FTSE 100 slumped, reflecting reduced expectations that the BoE will begin cutting rates in May.

Mitchells & Butlers enjoyed strong sales during the crucial Christmas trading period and expects its annual profit to come in at the top end of forecasts.

The All Bar One and Toby Carvery owner, which also flagged easing cost pressures on Wednesday, told investors it saw ‘record sales’ on Christmas Day and served 229,000 meals to customers.

Like-for-like sales rose 7.7 per cent in the first 15 weeks of the fiscal year starting 1 October, against 7.2 per cent growth reported in the initial eight weeks.

The new boss of Pearson has unveiled ‘strong’ 2023 performance for the education group, with sales and operating profit rising, despite a slowdown in virtual learning.

Andy Bird came out of retirement and took the reins at Pearson in October 2020, leading the group to meteoric growth via strategy shake-up, but he stepped down in September 2023 to be replaced by O

Booths enjoyed a record festive period as shoppers splashed out.

The family-owned supermarket – dubbed the Waitrose of the North with stores across Lancashire, Yorkshire, Cumbria, Cheshire and Greater Manchester – said sales in Christmas week were up 8.3pc on the previous year.

Ben & Jerry’s has called for a permanent ceasefire in Gaza in a move that risks reigniting a row with its owner Unilever.

Anuradha Mittal, chair of the ice cream maker, said: ‘Peace is a core value of Ben & Jerry’s.

‘From Iraq to Ukraine, [the company] has consistently stood up for these principles. Today is no different as we call for peace and a permanent and immediate ceasefire’

Derren Nathan, head of equity research at Hargreaves Lansdown:

‘BP has confirmed overnight speculation that interim CEO Murray Auchinloss, has been appointed to lead the group on a full-time basis. This has been met with a lukewarm response with the shares down 1% at the time of writing.

‘The shares have been drifting whilst the process to appoint a leader has continued, although this also reflects the direction of oil prices.

‘Mr Auchinloss certainly has a job to do to restore investor confidence, and close the valuation gap with arch rival Shell, and an even wider gulf with its US peers.

‘Continuity of the existing strategy is no bad thing but the shape of returns from the growing focus on energy transition technologies still needs to be proved.

‘In the short-term BP’s strong cash flows remain a key area of focus, enabling investment in future proofing the company whilst making supporting a yield of over 5%.

Despite cooling energy prices that position does not look under threat. Assuming an oil price of $60 per barrel, some way below the current price, BP should have room to continue growing the dividend, and purchase around $4bn of shares each year.’

888 Holdings has tempered 2024 earnings expectations, after heavy investment in artificial intelligence and other automation programmes offset the impact ofcost-saving measures.

Boss Per Widerström told shareholders on Wednesday the group was taking ‘rapid actions’ to cut overhead costs in a bid to free up cash to invest in future growth plans.

888 shares fell 13.09 per cent or 10.60p to 70.40p on Wednesday, having fallen over 24 per cent in the last year.

Charles Hepworth, investment director at GAM Investments:

‘It now seems that hopes for early cuts in rates from global central banks were a tad optimistic.

‘Tobacco duty increases and alcohol price rises accounted for the majority of the inflation surprise to the upside but on the plus side food price inflation continues to go in the right direction, albeit still high at 8% year on year by historical standards.

‘This all translates into murkier forecasting for the Bank of England as to when they can begin to ease rates and by implication that directly impacts market sentiment with gilt yields rising across the curve.’

Deal-making is back as confidence recovers, the UK boss of PwC has declared.

Kevin Ellis, the auditing giant’s chief executive, said potential buyers are ready to unleash a ‘wall of money’ having been sitting on their hands for the past year.

Merger and acquisition (M&A) activity has dwindled since 2022 as rising interest rates made it harder to finance deals.

London listed stocks are trading sharply lower in early trading a stronger-than-expected inflation reading tempered expectations around sharp interest rate cuts this year, while underwhelming data from China hurt miners and energy majors.

Keeping the FTSE 100 under pressure, sterling edged up after data showed Britain’s annual rate of consumer price inflation rose for the first time in 10 months in December, with a rise in tobacco duty behind the increase.

The data dampened investors’ conviction that the Bank of England will start cutting rates in May this year. Traders are pricing in a 50 per cent chance the central bank will hold rates in May.

Energy and mining giants such as Shell and Glencore have dipped on the back of weaker commodity prices after data showed China’s economy grew 5.2 per cent in 2023, slightly more than the official target.

Pearson has slipped 1.2 per cent even as the education company said it had met its guidance for 2023.

GSK has dumped £978million of Haleon shares, cutting its stake in the world’s largest standalone consumer healthcare firm to just 4.2 per cent.

The FTSE 100 drugmaker revealed on Wednesday it had sold around 300 million shares in Haleon at a price of 326p apiece, reflecting a roughly 2.7 per cent discount to the firm’s closing price on Tuesday of 333.6p.

BP has confirmed Murray Auchincloss as its permanent chief executive, following the resignation of former boss Bernard Looney last year.

Auchincloss has been acting as interim chief executive of the energy giant since September, but will now take on the role permanently.

BP said it had gone through a ‘robust and competitive’ search for a new boss, including considering candidates from outside the group, but decided Auchincloss was ‘the right leader’ for the business.

Auchincloss, who headed BP’s finances under Looney, indicated he will continue a strategy aimed at slashing carbon emissions, building up its renewables and clean fuel capacity, and cutting oil and gas output by 2030.

Susannah Streeter, head of money and markets at Hargreaves Lansdown:

‘Frustration is in the air as UK inflation continues to prove stubborn. The slight rise in the headline rate to 4% is the last move companies and households wanted to see, as it pushes the prospect of interest rate cuts further down the line.

‘There had been high hopes that with fuel costs falling and food price rises slowing, the headline rate of inflation would keep easing. However, rises in tobacco prices due to increases in duty helped pushed back up the headline rate.

‘Although the cost of raw materials did fall by 2.8%, the cost of goods leaving factories ticked up by 0.1%. With inflation still double the Bank of England’s target, policymakers are still likely to stay ultra cautious about the prospects for interest rate cuts this year.

‘Worries are still swirling about the effect on prices of delays to goods arriving from Asia, given that attacks in the Red Sea are disrupting around 20% of global shipping.

‘The tight labour market here in the UK will also be a cause for concern, despite signs that wage growth is easing. Downwards pressure on inflation is still expected, with the World Bank forecasting global growth to slow, and the UK economy at the edge of recession, this should act as a further drag on demand.

‘But the Bank of England is not expecting inflation to reach 2% until the end of 2025. So, although cuts are being eyed in 2024, more patience will be needed.’

888 Holdings expects annual profits to come in at the low end of market expectations following a year-over-year fall in fourth quarter revenue.

The Gibraltar-headquartered bookmaker is expected to report adjusted core profit for 12 months ending December 2024 of £377million.

Per Widerström, CEO of 888, said:

‘I have joined the business at both an exciting and important time. There are clear opportunities to unlock our significant potential, but as a business we know that going forward we must be more proactive in adapting to changes in regulation and technology.

‘We are now taking rapid actions to position the Group for future success, reducing our overhead costs and freeing up funds to invest in growth based upon our new strategy and value creation plan.

‘The financial performance of the Group must improve, and the actions we are taking will build a leaner, more agile, and more effective organisation structure, as well as establishing a more effective management of the customer and product life cycle.

‘These plans support material value creation and significantly higher profits over the coming years.

‘I have been working hard with the Board, our strengthened executive team, and the talented people across the business to refine our strategic framework, which is being translated into a value creation plan, and am confident that we are poised to deliver deleveraging and strong shareholder returns in the coming years.’

GSK has raised £978million from a discounted stake sale in Haleon, cutting its shareholding to 4.2 per cent in the world’s largest standalone consumer healthcare firm.

The drugmaker sold around 300 million shares in its spun-off unit at a price of 326p per share, compared to Haleon’s closing price on Tuesday of 333.6p

Jeremy Batstone-Carr, European strategist at Raymond James Investment Services:

‘The monthly headline rate of CPI edged up by 0.4%, the same rate as November, a consequence of retailers increasing prices following the Black Friday sales, but this rise disguises continued falling food prices seen across autumn.

‘Although prices are still rising in aggregate and remain above the Bank of England’s desired 2% target, the general direction of travel indicates that the economy will begin to blossom again as winter turns to spring.

‘When the Bank releases its overhauled forecasts, estimates will likely reflect this encouraging trend in domestic price pressures. This data has come too soon to capture any potential upside risk associated with shipping disruptions in the Red Sea, but this will likely be reflected in next month’s figures and will likely make little more than a marginal difference.

‘The Bank’s rate-setters will take heart from the strong likelihood that price pressures will continue to subside in the months to come.

‘Energy regulator Ofgem is also expected to deliver a sharp drop in the utility price cap in April, which will ease pressures on British households and may well be sufficient to drive inflation down to target far sooner than the Bank’s current expectations.’

BP has confirmed Murray Auchincloss permanent CEO, four months after he was given the interim job following the sudden resignation of Bernard Looney.

The appointment of Auchincloss, who headed BP’s finances under Looney, is seen by analysts and investors as a sign the board is seeking to continue BP’s strategy aimed at slashing carbon emissions, building up its renewables and clean fuel capacity and cutting oil and gas output by 2030.

Auchincloss, 53, became interim CEO after Looney resigned on 12 September for failing to disclose relationships with employees, throwing the energy giant into turmoil.

Helge Lund, chair of BP, said:

‘Since September, bp’s board has undertaken a thorough and highly competitive process to identify bp’s next CEO, considering a number of high-calibre candidates in detail. The board is in complete agreement that Murray was the outstanding candidate and is the right leader for bp.

‘Many already know Murray well, and few know bp better than he does. His assured leadership, focus on performance and delivery, and deep understanding of the opportunities and challenges in the energy transition will serve bp well as we continue our disciplined transformation to an integrated energy company.’

George Lagarias, chief economist at Mazars:

‘It should be no surprise that British inflation rose in December. Similar data from the US and the EU as well as other forward-looking reports have suggested that prices were ripe for a rebound.

‘Price rises are a symptom of persistent geopolitical instability and competition, a theme that will likely stay with us for most of the year. Having said that, we don’t have enough data yet which would suggest a major third inflation wave.

‘We believe that we are now finished with the linear drop in inflation and entering a phase of more volatile price movements.

‘Inflation numbers from the US, UK and EU should pour some well-deserved cold water at buoyant traders who are pricing rate cuts in the first quarter of 2024 and help bring market inflation expectations back to planet earth.’

Neil Birrell, chief investment officer at Premier Miton Investors:

‘Inflation in the UK jumped in December, meaning the annual rate rose to 4%. This is still well below the Bank of England’s forecasts in November but will nonetheless knock back expectations of an early interest rate cut.

‘The picture is still not clear overall, as this set of inflation data follows yesterday’s news that the annual increase in earnings is slowing nicely.

‘All eyes will remain on economic data until there is some certainty that we are heading back to target inflation levels.’

Consumer price inflation rose for the first time in 10 months in December, jumping from 3.9 to 4 per cent, fresh data from the Office for National Statistics shows.

The rise was a shock against forecasts the rate would ease to 3.8 per cent and will give the Bank of England pause for thought as it considers interest rate cuts this year.