LIVE: FTSE down and Wall Street mixed as UK inflation to fall below 2% by spring - Yahoo Finance UK
The FTSE was in the red on Wednesday as Wall Street opened mixed, and the Bank of England's governor Andrew Bailey discussed interest rates with the Treasury Select committee at the UK Houses of Parliament. (House of Commons, PA Images)
European stock markets were on the back foot on Wednesday despite news that UK inflation is predicted to fall to the Bank of England’s (BoE) 2% target this spring, in a welcome boost to mortgage holders.
In London, the FTSE 100 (^FTSE) was trading 0.3% lower in afternoon trade, while the CAC (^FCHI) was treading water in Paris, and the Frankfurt DAX (^GDAXI) was also flat as bearish sentiment remains ahead of key macro data.
The STOXX 600 (^STOXX) was 0.1% down on the day, with healthcare and utility shares the worst performers so far.
Across the pond, the S&P 500 (^GSPC) rose 0.1% after the bell, while the tech-heavy Nasdaq (^IXIC) was 0.1% lower. The Dow Jones (^DJI) slipped 0.1% in New York.
According to Deutsche Bank, UK CPI inflation will average 2.5% year-on-year in 2024, down from a previous forecast of 2.7%. Headline inflation will drop “a little below 2% in April and May”, before hovering around 2-2.5% for the remainder of the year.
Chief UK economist Sanjay Raja, said: "Core CPI, we think will slow to just under 4% y-o-y, with services inflation tracking just above 5% y-o-y. RPI, we think, will drop to 3.5% y-o-y on the year."
Bitcoin saw some significant volatility after the SEC tweeted that it had given approval for a Bitcoin ETF, a decision on which is expected today, before subsequently claiming that it had been hacked and had done no such thing.
The post on X claimed: “The SEC grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges.”
Soon after the initial post appeared, SEC chair Gary Gensler, said on his personal account that the SEC’s account had been compromised and that “the SEC has not approved the listing and trading of spot bitcoin exchange-traded products”. Gensler called the post "unauthorized".
X confirmed the SEC’s account was compromised and said it was because of an “unidentified individual” obtaining control over a phone number associated with the agency’s account through a third party.
The price of the world's largest cryptocurrency fell back to $45,500, losing $63bn in market value over just a matter of minutes.
Michael Hewson, chief markets analyst of CMC Markets, said: "Since the end of last year and the strong gains leading up to the end of last month markets have exhibited none of the same enthusiasm to carry the momentum higher, with trading activity subdued and a relatively negative bias so far year to date.
"It’s hard to assign a singular reason for the lack of enthusiasm so far month to date apart from a great deal of uncertainty around the prospects for the global economy and the timeline for central bank rate cuts."
Live13 updates
Cost of living crisis worsens UK gender pay gap
The cost-of-living crisis is worsening the gender pay gap, according to new research from employment group Reed.
The study found that the average female worker needs a 55% pay rise to live comfortably, compared to just 31% for men.
It analysed 17 million job adverts and surveyed 5,000 workers who indicated that they feel they need to earn £49,000 to live comfortably..
As well as earning less money, the research found that women are receiving fewer workplace benefits, with 65% receiving company perks, compared to 75% of men.
Karen Jackson, HR Director at Reed, said:
“We all know the gender pay gap remains alive and strong, yet these results reveal how much more work needs to be done, and how much further women have been pushed behind due to the cost-of-living crisis.”
UK inflation to fall below 2% in April and May
FILE PHOTO: A general view of the Bank of England in the City of London. REUTERS/Hollie Adams/File Photo (Reuters / Reuters)
Economists at Deutsche Bank have said that UK inflation could fall to the Bank of England’s 2% target this spring.
In a research note, the lender predicted that UK CPI inflation will average 2.5% year-on-year in 2024, down from a previous forecast of 2.7%.
Headline inflation will drop “a little below 2% in April and May”, before hovering around 2-2.5% for the remainder of the year.
Chief UK economist Sanjay Raja, said: "Core CPI, we think will slow to just under 4% y-o-y, with services inflation tracking just above 5% y-o-y. RPI, we think, will drop to 3.5% y-o-y on the year."
Share of Russian aluminium in LME warehouses rises to 90%
The share of available aluminium stocks of Russian origin in London Metal Exchange-approved (LME) warehouses rose to 90.4% in December, up from 78.8% in November.
This is according to data on the exchange's website on Wednesday.
The rise follows a restriction imposed by Britain from 15 December on UK entities and individuals taking physical delivery of Russian-made base metals, part of wider sanctions on Moscow for its war in Ukraine.
The crackdown along with muted demand in the physical market contributed to additional deliveries to the LME-registered warehouses, dubbed as a market of last resort.
"People are getting more nervous about holding the Russian inventory," an analyst told Reuters.
On-warrant aluminium inventories - those which have not been earmarked for removal and are available to the market - in LME-registered warehouses rose by 74% since the UK sanctions were announced. Warrants are title documents conferring ownership of metal.
"With regard to recent UK Government sanctions, the LME is actively monitoring for market orderliness in respect of Russian metal," the LME, the world's oldest and largest metals market, said in a separate comment.
HS2 costs could hit £66.6bn, MPs told
The estimated cost of building the HS2 rail link between London and Birmingham has soared to as much as £66.6bn, MPs have been told.
HS2 Ltd executive chairman Sir Jon Thompson told the Transport Select Committee that the estimated cost for Phase 1 is between £49bn and £56.6bn at 2019 prices, but adjusting the range for current prices involves “adding somewhere between £8bn and £10bn”.
In 2013, HS2 was estimated to cost £37.5bn (in 2009 prices) for the entire planned network, including now-scrapped extensions from Birmingham to Manchester and Leeds.
Sir Jon said reasons for the cost increase include original budgets being too low, changes to scope, poor delivery and inflation.
He said: “This is a systemic problem. It’s not just about HS2, it’s about large projects that the Government funds.”
Back in October, Rishi Sunak cancelled the northern leg of HS2 from Birmingham to Manchester, but the government is pressing on with the London-Birmingham link, the first phase of the line.
Greggs shares surge amid expansion plans
A customer leaves the Greggs store in Piccadilly Circus, central London. (Aaron Chown, PA Images)
Shares in Greggs surged over 7% as the high street bakery reported a 9.4% rise in like-for-like sales across its own-managed shops in the fourth quarter.
Greggs said it does not plan to hike prices over the year ahead, but is unlikely to be able to offer price cuts as rising wages keep costs under pressure.
The group said 2023 sales rose 19.6% to £1.81bn from £1.51bn the year before and with like-for-like sales growth of 13.7%.
Greggs revealed plans to open up to another 160 stores in the year ahead and cheered a strong end to 2023.
The group opened a record 220 new shops over 2023, with 33 closures and 42 relocations leaving it with 145 new sites on a net basis and taking its total estate to 2,473.
Greggs is set to open between 140 and 160 new shops on a net basis in 2024 as it looks to give customers more convenient access to its stores.
A European Central Bank (ECB) chief has warned that the eurozone may have entered a recession at the end of last year, while its prospects remain weak,
Vice President Luis de Guindos said the recent rapid slowdown in inflation is likely to take a pause now.
In a speech in Madrid, he said:
Soft indicators point to an economic contraction in December too, confirming the possibility of a technical recession in the second half of 2023 and weak prospects for the near term. Incoming data indicate that the future remains uncertain, and the prospects tilted to the downside.
Mr de Guindos repeated the ECB’s guidance that its record high interest rates of 4% would be maintained for a “sufficiently long duration” to bring inflation back down to the ECB’s 2% target.
Investors expect at least five rate cuts this year with the first move coming in March or April, a timeline several policymakers have called excessive given lingering price pressures.
Inflation is likely to fall at a slower pace this year than in 2023, says Vice-President Luis de Guindos.
Why tax cuts in 2024 might not leave you paying less
2024 is set to see a tax-cutting bonanza.
We’ve already had the first major change, with the slashing of national insurance. Now we’re hearing rumours of a raft of potential cuts as we go further into the year.
Unfortunately, this is nowhere near as good as it sounds.
Pile of new design US dollar bills as background. Top view point. 100 Dollars with a portrait of the President. (Oleg Polonskii)
The US dollar is trading softer after closing the previous session with more than a quarter per cent gain against a basket of other major currencies.
This strengthening of the greenback comes as expectations fade of a speedy unwinding of the Fed’s monetary tightening.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“In the run-up to the end of 2023, after a surprisingly dovish Jerome Powell all but announced the end of the fight against inflation, the dollar weakened as investors priced in a first rate cut in March, with several more expected throughout 2024.”
“However, the resilience of the US economy and the defiant tone of some Federal Reserve officials, who refused to claim victory in the fight against inflation, meant that the optimism of mid-to-late December evolved into uncertainty in a dynamic that is dollar positive.”
“Against this background, tomorrow’s US CPI numbers will be crucial in determining the short- to medium-term dollar price action.”
“These inflation figures can either consolidate the view that it is too early to announce the end of monetary tightening or, should they read below expectations, revive risk appetite and cancel the dollar gains of the last two weeks.”
Commentary: Sainsbury's cannot afford to rest on its laurels
Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club, said:
"Sainsbury's has worked hard to lower prices in the face of intense competition. The launch of Nectar prices, where Nectar card holders save money on everyday items seems to have been well received and has helped the group to hold its own against Tesco and the German discounters.
"Sainsbury's cannot afford to rest on its laurels. The supermarket sector remains intensely competitive and the UK consumer is far from being out of the woods, with the weaker clothing and General Merchandise sales pointing to an element of caution in consumer behaviour.
"Nevertheless, Sainsbury's all-important grocery sales are still holding up well. With food inflation moderating, and wages going up, the pressure on the UK consumer is easing. This ought to be good news for Sainsbury's and its peers heading into 2024."
Sainsbury's sales rise
And sticking with supermarkets this morning...
Sainsbury’s has revealed a jump in sales over the festive period with strong grocery sales volumes.
Britain's second largest supermarket chain said total retail sales, excluding fuel, grew by 4.9% in the six weeks to 6 January, with grocery sales up 8.6%.
However, it did see a drop in trade for clothing and in its Argos business, which fell 4.2%.
Simon Roberts, chief executive of Sainsbury’s, said:
We enter 2024 with strong momentum and next month we will share our updated strategy, building on all we’ve done to put food back at the heart of Sainsbury’s over the last three years. There is a lot to be excited about and we remain absolutely committed to deliver for our customers, colleagues and shareholders.
Cheapest supermarket of 2023 revealed
NUERNBERG, GERMANY - CIRCA JUNE 2022: Aldi Sued Storefront Sign (CHROMORANGE RM)
Aldi has been crowned the cheapest supermarket of 2023, beating its rival Lidl, according to consumer group Which?
My colleague Pedro Gonçalves writes...
December’s results show a basket of 43 groceries was £74.83 at Aldi, narrowly cheaper than at Lidl where it cost £76.74.
Aldi was the cheapest supermarket for 11 months of the year, with Lidl beating the rival discounter for one month in October, the consumer group said.
Waitrose came in nearly £20 more expensive than Aldi last month at £94.94, and Which? found it was the most expensive supermarket each month of 2023.
The watchdog said the findings demonstrated that shoppers could make considerable savings depending on where they bought their groceries.
Which? retail editor Ele Clark said: “With food prices continuing to put immense pressure on household budgets, it’s no surprise to see many people turning to discounters like Aldi and Lidl.
Which? also compared the cost of a larger trolley of more than 100 items each month. Aldi and Lidl are never included in this comparison as they do not always stock some branded products.
Asda was the cheapest supermarket for a larger trolley for 11 months of the year, apart from in July when Morrisons came out top.
Asian stock were mixed over night, however the Nikkei (^N225) rose 2% on the day in Japan, ending at a near 34-year high. It managed to break above 34,000 for the first time since 1990.
Exporters led the charge, helped by a softening yen to end at 34,441.72, while the broader Topix index gained 1.3% to 2,444.48, also its highest since 1990.
Meanwhile the Hang Seng (^HSI) fell 0.6% in Hong Kong, and the Shanghai Composite (000001.SS) was also 0.6% down by the end of the session.
Across the pond, the S&P 500 (^GSPC) closed almost 0.2% lower on the day, while the tech-heavy Nasdaq (^IXIC) was 0.1% higher. The Dow Jones (^DJI) slipped 0.4% in New York, ending at 37,525.16.
The benchmark 10-year yield on US Treasury bonds was up slightly at 4.017%.
Coming up...
Good morning, and welcome back to our live coverage of what's moving markets, and happening across the global economy.
Here's a quick look at what's on the agenda for today...
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