Inflation fall raises prospect of more quantitative easing

Inflation unexpectedly dropped in May as food and oil prices increased at a slower rate, according to figures released this morning by the Office of National Statistics (ONS).

The ONS said the benchmark Consumer Price Inflation index (CPI) slowed to 2.8 per cent in May from three per cent in April, confounding economists who had expected an unchanged reading.

Bank of England governor Mervyn King has previously hinted that another round of quantitative easing may be on the cards and analysts say these figures will strengthen his case.

“King’s comments last week indicated that more QE will soon be forthcoming and these figures might help to sway any of the more wavering members into voting for more stimulus,” said Vicky Redwood, an economist at Capital Economics.

Market report: FTSE benefits from caffeine hit as inflation falls

Coffee and a promise to safeguard the Eurozone from further contagion pushed the FTSE up 0.4 per cent in early trading this morning. As a result London’s blue chip index broke through the 5,500 level – a technical level seen as key for spurring further buying.

Last night European leaders at the G20 summit in Mexico spelled out their plans to create a more integrated banking system including common banking supervision and firm guarantees to repay bank depositors.

Meanwhile the UK inflation rate dropped slightly, thanks to smaller increases in food and oil prices. Britain’s Office for National Statistics said the benchmark Consumer Prices Index measure fell to 2.8 per cent in May from three per cent in April.

On the markets Whitbread, the owner of Costa Coffee and Premier Inn, was by far the biggest riser after it added 8.1 per cent following a strong quarterly update. It revealed that coffee sales at its chains were up over 25 per cent year-on-year, with overall sales growth across the entire hotels and restaurant group increasing by 13.9 per cent.

Engineering firm Weir Group was close behind, adding 5.3 per cent after it reaffirmed its full-year guidance and a strong medium-term outlook.

Miners Antofagasta and Evraz both gained more than two per cent while ARM Holdings, which designs processors for Apple products jumped 2.3 per cent.

Banks were largely unchanged, with Barclays off 0.4 per cent, Lloyds down 0.2 per cent and RBS down 0.5 per cent. HSBC once again bucked the trend and gained 0.8 per cent.

Unilever was the worst-performing FTSE 100 stock, falling 2.4 per cent after French rival Danone issued a profit warning. Other consumer firms such as Tate & Lyle and Diageo fell by more than one per cent while Reckitt Benckiser, owner of Dettol and Strepsils, lost 1.7 per cent

In the FTSE 250 Argos owner Home Retail gained an enormous 16.6 per cent after announcing that it had slowed the sales decline at its flagship chain.

In Asia Tokyo’s Nikkei lost most of yesterday’s gains and closed down 0.8 per cent. The Hang Seng was off 0.1 per cent.

Costa Coffee owner Whitbread boosts sales by 13.9 per cent

Sales at hotel and restaurant group Whitbread, the owner of Costa Coffee, were up 13.9 per cent in the last quarter.

Excluding new openings, like-for-like sales were up 4.5 per cent in the 13 weeks to 31 May 2012, the group said this morning.

Most of the growth came from the firm’s flagship coffee chain, which increased sales by more than 25 per cent if new outlets are included.

But there was also strong growth at the firm’s Premier Inn division, where total room nights sold increasing by 11 per cent to 3.3m in the quarter.

“Our consistent investment in product quality and customer experience has helped our strong brands to outperform their competitors,” said chief executive Andy Harrison.

Reiterating his firm’s previously announced expansion plans, he added: “Our plans for profitable growth are well established, supported by our strong balance sheet, and we plan to open 4,200 Premier Inn rooms, eight joint site restaurants and 350 new Costa stores this financial year, creating an additional 3,500 UK jobs.”

Home Retail says sales fall slows at Argos

Home Retail, Britain’s biggest household goods retailer, said sales at its main Argos business fell at a slower rate in its first quarter, while sales at its Homebase home improvement business were severely dented by wet weather.

Sales at Argos stores that have been open for over a year fell 0.2 per cent in the 13 weeks to June 2. That compares to a fall of 8.5 per cent in the previous quarter and exceeded analysts’ expectations.

The firm said this morning that trading had been volatile over the period but it was currently comfortable with market expectations for full-year underlying pre-tax profit.

“We will continue to plan cautiously,” said chief executive Terry Duddy.

Microsoft introduces tablet computer range to take on iPad

Microsoft signalled a significant change in strategy last night by announcing its own range of tablet computers to take on Apple’s iPad.

The firm, which has traditionally eschewed the hardware business in favour of licensing software to the third-party manufacturers, said it will launch a range of tablets under the “Surface” brand.

The range includes a consumer device aimed directly at the iPad, and another, larger machine designed to compete with lightweight laptops. Both include a keyboard that doubles as a cover, and both will be powered by versions of the new Windows 8 operating system.

Apple’s success has underscored the benefits of an integrated approach to hardware and software, and Microsoft Chief Executive Steve Ballmer said on Monday that the company “didn’t want to leave anything uncovered” as it rolled out Windows 8.

The new software is the biggest overhaul of Windows in years, and features a new touch-friendly interface dubbed “Metro”.

The lighter, thinner version of the Surface tablet, built on an Nvidia Corp chip designed by ARM Holdings, will be the first to market at the same time as the general release of Windows 8, and will feature Microsoft’s popular Office suite of applications.

It is comparable to Apple’s new iPad, heavier but slightly thinner. It has a 10.6 inch screen and comes in 32GB and 64GB memory sizes.

Management reshuffle at Man Group

Embattled hedge fund firm Man Group today sacked its finance chief in a management reshuffle designed to regain investor confidence and reverse poor performance at its flagship fund.

Kevin Hayes is to leave the firm immediately and will be replaced by Jonathan Sorrell, son of WPP chief Sir Martin Sorrell and formerly Man’s head of strategy and corporate finance.

Man’s shares have plunged by almost 70 per cent in a year, dropping out of the FTSE 100 in the process.

FTSE down as rally fizzles out

The FTSE enjoyed a brief rally this morning – but all the gains were wiped out by 9.30am.

The index had opened up 1.3 per cent, driven by strong performance from banks and commodity stocks as investors welcomed the result of Sunday’s Greek election.

A narrow victory by pro-bailout parties over radical leftists had eased concerns that the debt-laden country could leave the Eurozone.

But just 90 minutes later traders changed their mind. As a result the same commodity firms and financial institutions dragged the index down by 0.2 per cent.

Banks took most of the punishment with Lloyds down three per cent, RBS off 2.8 per cent and Barclays down 2.4 per cent. HSBC bucked the trend and added 0.3 per cent.

Mining giant Xstrata was close behind, dropping 2.1 per cent, while its sister firm Glencore lost two per cent.

Fellow commodities firms Randgold, Kazakhmys and Vedanta all suffered, while generator provider Aggreko lost 2.1 per cent.

Some solace could be found in high-end consumer goods, with fashion firm Burberry gaining 1.2 per cent and ARM Holdings – the firm that designs processors for Apple products – gaining one per cent.

BSkyB recovered 0.8 per cent after falling heavily at the tail-end of last week.

In the FTSE 250 Cable & Wireless Worldwide was up almost eight per cent after a major shareholder said it would not oppose a takeover bid for the firm.

Asian markets responded more favourably to the Greek election with Tokyo’s Nikkei adding 1.8 per cent and the Hang Seng gaining one per cent.

Tesco to sell half its Japanese business to Aeon

Supermarket giant Tesco is to sell half of its Japanese business for a nominal sum.

Japan’s second biggest retailer Aeon Corp will has bought a 50 per cent share in the loss-making business for a nominal sum.

Tesco put the unit up for sale last August, ending an eight-year attempt to break into the domestic retail market.

Asian shares rise after Greek election result

Asian shares rose more than 1.5 per cent today after Greeks narrowly avoided handing an election victory to the anti-bailout Syriza party.

MSCI’s index of Asia Pacific shares outside Japan rose 1.6 per cent and Tokyo’s Nikkei closed up 1.8 per cent, its best finish in nearly a month.

“It’s a temporary rally but we’re seeing broad gains because the global situation has changed now that the prospect of a ‘Drachmageddon’ has disappeared,” said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities..

On the currency markets the euro was up around 0.6 per cent at $1.2710.

Mirror’s Sly Bailey quits with immediate effect

Sly Bailey will step down as chief executive of Trinity Mirror with immediate effect and not at the end of the year as originally planned, the newspaper group announced today.

Bailey announced in May that she would step down from the publisher of the Daily Mirror tabloid after shareholders took issue with her large pay package at a time of falling profits and sales.

Since the announcement the group has fired the long-serving editors of its daily and Sunday tabloids and moved to a seven-day publishing model to improve efficiency.

Trinity Mirror said finance director Vijay Vaghela would work with the newly appointed chairman David Grigson to run the group until a new chief executive is found.

“Despite the deep economic downturn, the actions she has taken with her team have ensured the company has consistently delivered robust profits,” Grigson said. “We wish her well for the future.”