stock moves, UK inflation data, earnings

Policymakers at the Bank of England won’t be overly concerned by the rise in U.K. inflation to an unexpectedly high of 3% in January, according to ING’s developed markets economist, James Smith.

“I think everybody anticipated this pick-up in services inflation,” Smith told CNBC’s “Squawk Box Europe” on Wednesday. Components that drove the headline rise, including higher air fares, private school fees and food prices, are not focuses for the U.K. central bank, he continued.

“Take out the noisy stuff… the news is getting better. That core, services view is coming down slowly.”

However, the trajectory of wages and the labor market — among the most important factors for the BOE — are the “major uncertainty right now,” Smith said.

Money market pricing currently points to a likely BOE interest rate hold in March following its January cut, and for another half-percentage point worth of cuts by the end of the year.

— Jenni Reid

Average U.K. house prices rose 4.6% to £268,000 ($337,669) in the 12 months to December 2024, the Office for National Statistics said Wednesday, up from the 3.9% growth rate in November.

Average private rent meanwhile increase 8.7% in the 12 months to January, the ONS said, a slight cooling from 9% in December. Average rent was £1,375 in England, £780 in Wales and £995 in Scotland.

“With demand still outstripping supply both for purchasing and the rental markets, it’s not surprising to see prices continue to hold or increase over the last 12 months,” Justin Moy, managing director at EHF Mortgages, said in emailed comments.

“For rentals, the smaller landlords are selling and the corporate landlords are taking up market share at pace, whilst for first-time buyers the opportunity to own your home is still attractive, even with higher mortgage rates.”

— Jenni Reid

London-listed shares of HSBC were up 0.7% in mid-morning deals, reversing an earlier slight loss, after the bank announced a share buyback of up to $2 billion and an annual pre-tax profit increase of 6.5%.

The gains came despite analysts at Deutsche Bank downgrading the stock to “hold” from “buy,” writing that “after a substantial increase in share price, the value, in our view, is no longer there.”

“HSBC doesn’t have to do a lot to maintain a healthy mid-teens ROTE [return on tangible equity] after many years of restructuring. We expect any incremental restructuring will be relatively small and aimed at maintaining ROTE levels against a falling rate environment across a global cost base,” they said in a note Wednesday.

“If the scale of restructuring is contained, then we believe our capital return expectations could remain unchanged — one of the key attractions of the stock.”

HSBC shares have notched significant gains in recent years, adding 26.5% in 2024, and are up another 14% already in the year-to-date.

UBS analysts said Wednesday that the bank had delivered profit before tax 9% above consensus in the fourth-quarter 2024, but said investor focus would now be on whether it could deliver “long term growth at an attractive price.”

— Jenni Reid, Ganesh Rao

European stock markets were mixed early Wednesday, with the regional Stoxx 600 index moving either side of the flatline.

Germany’s DAX managed a 0.28% gain, while France’s CAC 40 was 0.12% lower and the U.K.’s FTSE 100 dipped 0.26%.

Britain’s largest defense firm BAE Systems said on Wednesday that its order backlog rose 11% to a record high at the end of 2024, as it reported a 14% increase in annual revenue for 2024.

Operating profit rose 4% to £2.69 billion ($3.39 billion) over the period.

“Based on the exceptional visibility of our record order backlog and sustainability of our value-compounding business model, we remain confident in the positive momentum of our business into the future,” CEO Charles Woodburn said in a statement.

BAE Systems and other European defense companies have posted share gains this week on expectations of higher government spending.

Matt Dorset, equity analyst at Quilter Cheviot, said in emailed comments that the results had exceeded consensus expectations across the board, including on earnings per share, organic sales and underlying earnings.

“We continue to see structural tailwinds supporting BAE, driven by increased global defense spending,” Dorset said.

“Not only will larger defence budgets drive demand, but Europe is also likely to focus on enhancing its own defence production capabilities rather than relying on US exports.”

“BAE Systems, as a pureplay UK defence company with substantial exposure to European demand, is well-positioned to capitalise on this.”

— Jenni Reid

Annual U.K. inflation rose to 3% in January, higher than analyst expectations, according to data released by the Office for National Statistics on Wednesday.

Economists polled by Reuters had expected a reading of 2.8%.

Read more here.

— Holly Ellyatt

Philips CEO Roy Jakobs said Wednesday that recovery in Chinese consumer demand was a “when not if” story, after the health-care technology giant reported a double-digit fall in China sales.

“We believe [Chinese demand] will come back, long term it’s attractive, but we’re just not sure when it’s going to happen and when it’s going to hit that inflection point,” Jakobs told CNBC’s “Squawk Box Europe.”

Jakobs said that the importance of health care to the country’s ageing population meant pent-up demand would start to build up, and that he foresees strength in North America sales to continue.

On the risks to the business from U.S. President Donald Trump’s tariff threats, Jakobs said Philips had already been reducing its exports from China to the U.S. and had included the impact in its current guidance.

He added that “uncertainty around tariffs” was why the company had provided a wide adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin outlook for 2025 of 30 to 80 basis points.

Philips reported a 1% increase in comparable sales growth for both the fourth-quarter and full-year 2024 on Wednesday. Its net loss widened to 698 million euros ($729.9 million) from 463 million euros on an annual basis, with fourth-quarter performance slipping year on year from a 38 million euro profit to a 333 million euros loss. That weaker annual loss was in part due to a nearly 1 billion euro provision after it settled in a long-running U.S. case over its Respironics devices.

Jakobs said 2024 had been a “pivotal” year for Philips in which it had reduced liability and improved its fundamentals, including margin expansion and strong cash generation.

— Jenni Reid

Dutch health-care technology group Philips on Wednesday reported comparable sales growth of 1% for the fourth quarter and 1% for the full year 2024, as strength in North America was offset by a double-digit decline in China.

The quarterly figure was below market expectations, according to Reuters.

Sales fell in its Diagnosis and Treatment and Personal Health units, and rose 7% in its Connected Care business.

The company said its outlook was for 1%-3% comparable sales growth in 2025, with a mid- to high-single-digit decline in China.

European markets are expected to open in mixed territory Wednesday.

The U.K.’s FTSE 100 index is expected to open 5 points lower at 8,763, Germany’s DAX up 9 points at 22,868, France’s CAC down 12 points at 8,209 and Italy’s FTSE MIB 58 points higher at 38,686, according to data from IG.

Earnings come from BAE Systems, Glencore, Rio Tinto, Koninklijke Philips and Carrefour.

Data releases Wednesday include the latest U.K. inflation data. Economists polled by Reuters expect the U.K.’s consumer price index to have risen to 2.8% in January, up from 2.5% the previous month.

— Holly Ellyatt