FTSE gains slowly after inflation report

In mid-morning trading the FTSE 100 is down 20 points, after traders began the day holding their breath ahead of the UK inflation figures.

Stocks are still offside, despite making ground after the inflation report. The drop in the cost of living exceeded analysts’ estimates and actually boosted equities. It's clear that the bond-buying scheme by the Bank of England (BoE) is burning the candle at both ends: output and growth are increasing while inflation is declining, leaving the door open for a longer-than-expected QE programme. The major risk when operating a stimulus package is that an accelerated inflation rate will outstrip the level of growth, but as this is not an issue for the BoE its £375 billion scheme is unlikely to be reduced anytime soon.

Today is the calm after the storm for RSA Group. The insurer dropped to a nine-year low yesterday after it uncovered ‘issues’ at its Irish operation. The company received a cash injection to meet capital ratios - when it comes to solvency, investors are not taking any risks. Meanwhile, Vodafone is feeling the pinch in Europe. The debt crisis has taken its toll on company revenues, but the telecoms firm is spending £7 billion on its networks after cashing in its Verizon stake in September.

In the US, we are expecting the Dow to open 30 points lower at 15,753, as US reporting season is winding down.

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