By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- The U.K.'s FTSE 100 dodged a loss
Tuesday, but shares of Burberry Group PLC were stuck in the red
after the British luxury-goods maker sounded a cautious note about
demand.
The benchmark index rose 0.4% to end at 6,392.68, aided by gains
for mining and industrial issues. International Consolidated
Airlines Group was the top advancer on the index, rising 4.8% after
HSBC upgraded the parent company of British Airways to an
overweight rating from neutral.
The FTSE 100 had reached intraday lows after U.K. government
data showed the annual headline rate of inflation fell to 1.2% in
September, stemming largely from a 6% drop in the price of motor
fuels. The result was well below expectations of a 1.4% reading,
and marked the lowest inflation rate since September 2009. Core
inflation -- which strips out the price of energy, food, alcoholic
beverages and tobacco -- rose 1.5%, the lowest reading since April
2009.
The pound (GBPUSD) fell to an 11-month low against the U.S.
dollar, buying $1.5928 versus $1.6076 late Monday, in the wake of
the inflation results.
Stock movers: Leading losses on the FTSE, Burberry fell 3.7%.
The luxury fashion company said sales in the first half of the year
climbed 14% to 1.1 billion pounds ($1.8 billion). While same-store
sales growth of 12% in the first quarter was in line with its
expectations, comparable sales in the second quarter slowed to 8%,
"affected by external factors in some markets," Burberry said.
Off the FTSE 100, Mulberry Group PLC sank 11% following the
company's warning that pretax profit for the full year to March
2015 will likely come in "significantly below current
expectations." The shares had been down by more than 20% during the
session.
As for International Consolidated Airlines, the Ebola virus
epidemic is serious in West Africa "but we think it is unlikely to
substantially impact air travel demand across IAG's network," HSBC
told clients. IAG's third-quarter results on Oct. 31, and
interaction with investors on Nov. 8 should reassure the market,
HSBC added.
Tesco PLC shares shed 0.4%. The supermarket chain has requested
three more employees step back from their roles as the company
continues to investigate its accounting practices. Tesco last month
said it overstated its first-half profit forecast by 250 million
pounds ($398 million). The "forensic investigation could, in our
view, create operational paralysis for Tesco ahead of the very busy
Christmas build up," Cantor Fitzgerald told clients in a Monday
note.
Data thoughts: The downside inflation surprise and "next to no
growth" in the eurozone -- the U.K.'s largest trading partner --
over the next six months "will weigh on U.K. rate setters'
decisions," said Rob Wood, chief U.K. economist at Berenberg, in a
note. "Those trends remove the already very slim chances of a rate
hike before next year, and could stay the [Bank of England's] hand
next February, if eurozone sentiment does not pick up by then."
The BOE's benchmark interest rate currently stands at a record
low of 0.5%.
Meanwhile, Rabobank senior currency strategist Jane Foley said
they see "risks of the BOE delaying a rate hike beyond May as
rising," in the face of weakening CPI inflation and the absence of
a rise in real wages in the U.K.
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