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London Markets: Burberry shares surge in London as inflation jumps to a 30-year high

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Burberry shares rallied Wednesday, as the luxury-goods maker reported steady comparable-store sales in its fiscal second quarter.

Burberry BRBY, +5.98% shares rose 6% after it said it expects its adjusted operating profit to grow 35% at constant exchange rates, which analysts at Bank of America say implies earnings before interest tax of £508 million, or 7% above consensus expectations. The analysts say at 17 times fiscal 2023 earnings, the stock is inexpensive relative to both its history and peers, and increased evidence over a brand turnaround could be a catalyst for a rerating.

Pearson PSON, +5.98% shares jumped 6% after the education publisher said fiscal year adjusted operating profit will be about £385 million, compared to expectations of £375 million. In the fourth quarter, underlying sales growth was 1%, or 2% when the businesses up for strategic review are excluded. Analysts at Citi called it a “balanced” performance that will help the stock given the cautious positioning ahead of results.

On the downside, International Airlines Group IAG, -2.43% fell 3% as British Airways cancelled some of its flights to the U.S. over 5G concerns.

The broader FTSE 100 UKX, +0.66% rebounded 0.6% to 7609.12, and now is up 3% for the year.

Investors took in stride the news that inflation in the U.K. jumped to a 30-year peak of 5.4%. George Buckley, an economist at Nomura, expects the Bank of England to make a quarter-point rate hike in February, after its first hike in December. “The Bank of England had expected CPI inflation to be 4.5% in December, so today’s print represents another material upside miss relative to the central bank’s view,” he said.

The yield on the 2-year gilt TMBMKGB-02Y, 0.925% rose 4 basis points to 0.91%.

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