LONDON: U.K. stocks finished higher Tuesday, with consumer-related shares propping up the benchmark FTSE 100 in the wake of reports indicating inflation tapering.
The FTSE 100 UKX, +0.60% rose 0.6% to 6,898.13. The index had been lower earlier in the session after a collapse in talks between Greece and eurozone finance ministers late Monday reignited fears about the eurozone, the U.K.’s biggest trading partner.
But consumer stocks got a lift following the Office for National Statistics’s report that showed annual consumer-price inflation in January slowed to 0.3%, the lowest annual rate since March 1960. Inflation has cooled as prices for food and gasoline have declined.
Smirnoff vodka and Crown Royal whiskey maker Diageo PLC DGE, +2.50% and Imperial Tobacco PLC IMT, +2.20% topped the benchmark as their shares rose 2.5% and 2.2%, respectively. British American Tobacco PLC BATS, +1.92% gained 1.5% as did consumer-products heavyweight Unilever PLC ULVR, +1.89% .
The “good news” for most consumer-spending centered companies stemming from the inflation report “is that consumers should go out and make purchases. The bad news is that it could hit their bottom lines if they are going to have to start cutting prices or there’s some sort of price war on the high street,” said Kathleen Brooks, research director at Forex.com.
Labor-market readings for December will be released on Wednesday, “and if we get another good reading on the jobs front that wages will pick up quite dramatically this year….then that’s going to be fantastic news for our beleaguered High Street,” Brooks said. Average weekly earnings excluding bonuses are expected, on average, to rise 1.8%, according to a FactSet consensus projection.
The pound GBPUSD, -0.01% fell to $1.5345 after the inflation report, from $1.5364 late Monday.
