Global stocks fell as traders digested the latest US inflation report (Peter Morgan, Associated Press)
The FTSE (^FTSE) and European stocks reversed their strong gains on Wednesday as Wall Street slipped on the back of a key US inflation report.
Consumer prices grew by 3.5% from a year earlier, rising from 3.2% the previous month, and greater than the 3.4% rise predicted by analysts. This increase was driven primarily by an increase in energy prices and shelter costs.
Traders now believe the Federal Reserve will only reduce borrowing costs twice rather than three times this year, with the first cut pushed back from September to November.
London’s benchmark index was 0.3% up by the end of the session
Germany's DAX (^GDAXI) ended flat and the CAC (^FCHI) in Paris headed 0.1% into the red
The pan-European STOXX 600 (^STOXX) managed to eke out a 0.1% gain
Wall Street opened in negative territory on the back of the inflation data
Tesco (TSCO.L) climbed as much as 6% as profits rose by almost 160%
“Of course, there has been progress on the multi-decade high inflation, but it has been slow in the past several months," said Nigel Green, chief executive and founder of deVere.
“Indeed, headline CPI has barely moved since the Fed stopped hiking, although core, which officials believe is a better barometer of longer-term trends, has fallen about a percentage point.
“Also, there was a far stronger-than-expected jobs report last Friday which only adds to the issues for the Fed.”
He added: “We’re still a far cry from the central bank’s 2% target – and the policymakers will need to be a lot more convinced, and over a few months too, before they pivot.
Follow along for live updates throughout the day:
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LaToya Harding
Cost of UK passports to rise for second time in 14 months
The cost of a new or renewed UK passport is going up again for the second time in 14 months – rising by 7% to £88.50 for an adult online application from tomorrow. Meanwhile applying by post will cost £100.
The rise follows a 9% price hike to £82.50 in February last year.
Children’s passports will also cost more, going up from £53.50 to £57.50 for an online application.
Guy Hobbs, a travel expert at Which?, said:
“While these latest price rises may well reflect rising production or processing costs, the UK passport is now amongst the priciest in Europe – and travellers due to renew will likely be shocked by how much these little blue books now cost.
“Travellers should also be aware that from mid-2025 they will need to pay for an Etias [The European Travel Information and Authorisation System] to enter Europe.”
LaToya Harding
Pound falls against strong dollar
The pound (GBPUSD=X) has now lost a whole cent against a resurgent US dollar today, with sterling down 0.9% at $1.2566 at the time of writing.
Meanwhile, the US greenback has hits highest against yen since July 1990. The higher-than-expected US inflation reading has driven the dollar up to 152.31 yen — levels last seen 34 years ago.
Reuters said the markets are alert to any signs of intervention from the Japanese authorities to prop up the yen.
LaToya Harding
Key items driving US inflation
Here are some of the key items really driving inflation in America...
Car insurance +22%
Car repair +12%
Baby formula +10%
Veterinarian +10%
Rent +5.9%
Electricity +5%
Restaurants +4.2%
Gas +1.3%
LaToya Harding
BoE and ECB could start cuts before Fed
Federal Reserve Board Chair Jerome Powell speaks at the Business, Government and Society Forum at Stanford University in Stanford, Calif., Wednesday, April 3, 2024. (AP Photo/Jeff Chiu) (Jeff Chiu, Associated Press)
The uptick in US inflation could now mean that the Bank of England (BoE) or the European Central Banks (ECB) could start cutting rates before the US Federal Reserve.
Daniele Antonucci, chief investment officer at Quintet Private Bank, said:
Not only did the numbers surprise to the upside once again. The all-important core measure, which strips our volatile components such as energy and food, did beat expectations too.
It’s possible, and we think likely, that the central bank will reduce its policy rate this year. This is because, while the economy remains quite robust at this stage, it should slow further out.
Also, the Fed’s preferred measure, which is based on the personal consumption expenditure index, has surprised to a lesser extent and its level is lower, perhaps posing a lesser hurdle to at least starting to reduce rates.
Yet we think the timing is now more uncertain than ever and we see a greater chance that the European Central Bank and the Bank of England start their rate cutting cycle ahead of the Fed.
LaToya Harding
US inflation uptick dashes May rate cut hopes
Today’s CPI data has fuelled further speculation around the timing of a Fed rate cut.
Inflation increased by 0.4% in March and on a 12-month basis rose to 3.5%, up from 3.2% last month and higher than market expectations.
Richard Carter, head of fixed interest research at Quilter Cheviot:
“These monthly readings will have dashed any remaining hopes of a Fed rate cut as early as May, as yearly CPI still sits firmly above the FOMC’s 2% target and has been heading in the wrong direction for the past few months. There had been hopes that today’s report would show the hot CPI figures from January and February were anomalous, but while that has not been the case, this recent uptick in inflation could just be a bump and we could see it begin to lower once more in the coming months.
“Central bank officials will be keeping a very close eye on these figures, and today’s print will have done little to quell fears that inflation is proving too stubborn. Markets are still hoping for a rate cut this summer, but the Fed will be looking for consistent signs of disinflation in the coming months before making the call.”
LaToya Harding
US inflation rises to 3.5%
US inflation rose by more than expected in the year to March, shattering hopes for a rate cut from the Federal Reserve.
Consumer prices grew by 3.5% from a year earlier, rising from 3.2% the previous month, and greater than the 3.4% rise predicted by analysts. This increase was driven primarily by an increase in energy prices and shelter costs.
Traders now believe the Federal Reserve will only reduce borrowing costs twice rather than three times this year, with the first cut pushed back from September to November.
Markets fell on the back of the news in New York.
NASDAQ DOWN 197.51 POINTS, OR 1.21 PERCENT, AT 16,109.13 AFTER MARKET OPEN
S&P 500 DOWN 55.51 POINTS, OR 1.07 PERCENT, AT 5,154.40 AFTER MARKET OPEN
DOW JONES DOWN 359.10 POINTS, OR 0.92 PERCENT, AT 38,524.57 AFTER MARKET OPEN
The US stock markets is set to open higher in an hours' time with S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) all in the green.
Pierre Veyret, technical analyst at ActivTrades, said:
“The US Consumer Price Index is widely expected to rise 0.3% compared to last month and 3.4% compared to last year. Any figure below those thresholds could significantly revive hopes of dovish monetary moves from the Fed, boosting investors’ appetite for riskier assets.”
“That said, given the last round of sound economic data from the US, worse inflation figures than expected could dramatically affect market sentiment for equities, probably leading benchmarks into a much deeper correction.”
LaToya Harding
London bars group Darwin & Wallace sold to Portobello Pubs
A London pub chain known for its Scandinavian-influenced interior design and gourmet breakfast menu is changing hands, as the “neighbourhood” bars group was bought by Portobello Pub Company today.
The Evening Standard has the details...
Darwin & Wallace operates seven pubs, mostly in South West London, at locations including Battersea Power Station and Chiswick Fire Station. It says all of its locations “take inspiration from their local areas”, and are designed in response to the “formulaic” style of many London watering holes.The chain is named after naturalists Charles Darwin and Alfred Russel Wallace.
The price was not disclosed, but the acquisition likely means a big payout for Darwin & Wallace founder Mel Marriott, who will step away from the day-to-day operation of the pubs as Portobello takes over.
Marriott said:
“I am incredibly proud of what we’ve built at Darwin & Wallace and am immensely grateful to everybody who has been a part of this journey.
“While it’s the end of an era for me, what we have created is truly special and I am looking forward to watching the business continue to flourish under the stewardship of Mark, Richard and the Portobello team.”
LaToya Harding
German company bankruptcies hit record high
Insolvencies by German partnerships and corporations rose to another record high in March, new research has found.
According to the Leibniz Institute for Economic Research Halle (IWH), there were 1,297 insolvencies during the month, 9% more than the previous record in February. This also came in at 35% more than in March 2023.
IWH said that insolvencies often lead to high and permanent losses of income and wages for the affected employees, but it believes an end to the increase in the number of insolvencies is in sight.
Good Morning from Germany where the number of company bankruptcies hit another record high in March. Acc to the IWH econ institute, the number of insolvencies of partnerships and corporations in Germany rose by 9% MoM to 1,297 in March. Current number is also 35% higher than in… pic.twitter.com/oDqSLHsiUX
UK homeowners renting out rooms amid high mortgage rates
UK homeowners are renting out a room in their house as a way of making some extra money amid the cost of living crisis that has pushed mortgage rates to record highs.
Over one in every 10 (12%) London homeowners have started renting out a room in their house in the past year to generate additional income, according to Barclays Consumer Spend report.
The trend is not exclusive to the capital, as some 3% of homeowners across the UK have also rented out a room in their property to make a bit more money.
UK homeowners have been particularly hit by cost of living woes, with the average rate on a two-year fixed deal currently stands at 5.74%, while for a five-year deal, rates are around 5.24%, according to figures from Uswitch.
Borrowers would need to spread their home loans over more than 70 years to be able to afford the same mortgages on offer just two years ago, banks have said.
Gold continued to shine on Wednesday, with prices up 0.3% during the session, after a near-20% surge since mid-February.
It comes as the gains have been fuelled by expectations that the US Federal Reserve will lower interest rates this year, as well as the ongoing conflict in the Middle East and Ukraine.
In New York’s Comex gold futures market, money managers are placing more bullish bets on gold, with net long positions rising to near four-year high in the week ending 2 April.
Meanwhile, purchases by central banks totalled more than 1,000 tons in 2022 and 2023 with much of that led by economies, particularly China, where efforts to diversify away from the dollar have accelerated.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“Gold prices edged up during early Wednesday trading, defying the uncertainty surrounding the impending release of US inflation data later today.”
“All eyes in the financial markets are fixed on the forthcoming publication of the March US Consumer Price Index figures, anticipated to reveal persistent inflationary pressures in the world's largest economy. Following last week's strong non-farm payrolls report, which underscored the resilience of the US economy, a robust inflation reading would further bolster the case for the Federal Reserve to prolong its high interest rate stance.”
“Such an outcome could trigger an uptick in treasury yields and strengthen the dollar, potentially dampening the allure of gold; nevertheless, the precious metal continues to enjoy strong demand amidst geopolitical instability, uncertainties surrounding the global economic landscape, and substantial central bank acquisitions, factors that are likely to anchor bullion prices near current levels.”
Boeing delivered just 29 airplanes in March, compared to the 64 delivered in the same month a year ago, as 737 MAX production slipped on increased quality checks and audits by regulators.
It is producing fewer MAX single-aisle jets to improve manufacturing quality after the mid-air blowout of a door plug on a 737 MAX 9 jet brought increased scrutiny from regulators.
Boeing's monthly output rate fell as low as single digits in late March, well below a Federal Aviation Administration-imposed (FAA) cap of 38 jets a month, Reuters reported.
During the first three months of 2024, the firm handed over 83 airplanes to customers, including 66 MAX jets, down from a total 130 airplane deliveries during the first quarter of 2023.
"We're deliberately going to slow to get this right," Boeing Chief Financial Officer Brian West told a Bank of America conference last month. "We are the ones who made the decision to constrain rates on the 737 program below 38 per month until we feel like we're ready."
Boeing said it delivered eight MAX jets to Chinese operators in March. China resumed MAX deliveries in January.
LaToya Harding
BMW sees EV sales surge
BMW sold 28% more electric vehicles in the first three months of the year it has been revealed.
The German carmaker saw deliveries of models such as i4, iX1 and i7 rise by 41%, offering a glimpse of hope for the battered European EV sector.
It comes as other manufacturers have seen global sales plummet at the start of 2024 thanks to high interest rates and Red Sea shipping disruption.
LaToya Harding
Coinbase introduces Apple Pay to app
Photo by: STRF/STAR MAX/IPx 2021 6/2/21 Coinbase to launch its Coinbase Card on Apple Pay and Google Pay. STAR MAX Photo: Apple Pay, coinbase and Google Pay logos photographed on multiple iPhone devices. (STRF/STAR MAX/IPx, Associated Press)
UK Coinbase users can now use Apple Pay to buy Bitcoin, Ethereum and other digital assets made available online and within the app.
Daniel Seifert, Country Director for the UK and Vice President, EMEA at Coinbase said:
“We are extremely proud to announce our UK users can now use Apple Pay to make easy, secure and private purchases online and in-app, helping us in our goal of increasing accessibility to digital assets in the UK.
We know users already love using Apple Pay in their daily lives, so it only made sense to bring this convenient way to pay to Coinbase as well.”
It comes as more than 6 million UK adults currently own cryptocurrency. By lowering the barriers to entry to the digital asset market, Coinbase is aiming to increase this number throughout 2024 and beyond.
LaToya Harding
Baby boomers coping best with higher bills
According to the Financial Conduct Authority (FCA), baby boomers have coped best with the cost of living squeeze.
It comes as 7.4 million UK adults are still struggling to pay bills due to the high cost of living.
Although this number has fallen from last year, many households still feel "heavily burdened".
The city watchdog said over-75s were most likely to say they were coping well with daily financial pressures, while those aged under 44 were most likely to say they were struggling.
Its survey suggested that one in nine adults (5.5 million people) had missed a bill or credit payment in the six months to January 2024.
Meanwhile, one in nine people also had no disposable income.
Sheldon Mills, the FCA’s executive director of consumers and competition, said:
“Our research shows many people are still struggling with their bills, though it is encouraging to see some benefiting from the help that’s available.”
LaToya Harding
Unite accuses Tesco of profiteering
Not everyone is happy about Tesco's bumper profits today, with Unite the Union slamming the company amid a cost of living crisis.
Sharon Graham, Unite general secretary, said:
“Tesco is raking in mountains of cash while families struggle to put food on the table because of sky high prices. Many companies have used the cost-of-living crisis to grab excessive profits.
“There is an epidemic of profiteering in our economy – the government has been missing in action and failed to curb it.”
LaToya Harding
Tesco profits soar 160%
Exterior view of a UK Tesco superstore (supermarket) with parked cars in the outdoor car park. (Lee Hudson)
Tesco (TSCO.L) shares climbed as much as 1% in London on Wednesday after it revealed a 160% rise in pre-tax profits, soaring from 882m in 2022 to £2.3bn.
Sales at Britain’s largest supermarket rose by 4.4% to £68.2bn in the year to 24 February while more than 4,000 products were cheaper at the end of the year, with an average price cut of around 12%.
It is now expecting retail adjusted operating profit of at least £2.8bn in 2024-25.
Tesco also predicted that food inflation will stabilise in low single digits for the rest of the year, as it plans to make £500m in efficiency savings in the year ahead.
Retail adjusted operating profit, which excludes results from Tesco Bank, rose 10.9% to £2.76bn.
"Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year," said Ken Murphy, chief executive.
"We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices."
LaToya Harding
Traders awaiting US inflation report
Traders are looking ahead to the latest US inflation report due out this afternoon.
The CPI rate is expected to show a small increase in the pace of price rises, increasing from 3.1% to 3.4%. However, core inflation could slow slightly from 3.8% to 3.7%.
Dan Coatsworth, investment analyst at AJ Bell, said:
The central bank wants to see sustained evidence of inflation coming down and that doesn’t appear to be on the menu. The signs are clear for investors to see, but many have been choosing to ignore them.
The Fed putting it into black and white could be a difficult pill for investors to swallow, so brace yourself for turbulence on the market this week.”
LaToya Harding
Fitch downgrades China outlook to negative
A woman reacts near a dragon sculpture outside a restaurant in Beijing, Tuesday, April 9, 2024. China's Finance Ministry has denounced a report by Fitch Ratings that kept its sovereign debt rated at A+ but downgraded its outlook to negative, saying in a statement that China's deficit is at a moderate and reasonable level and risks are under control. (AP Photo/Ng Han Guan) (Ng Han Guan, Associated Press)
Fitch has downgraded its long-term outlook on China to negative while maintaining the country’s A+ credit rating.
The US-based rating agency said the adjustment was driven by the country's bealeagured property sector, which has introduced increased uncertainty.
Fitch predicted a rise in the general government deficit to 7.1% of GDP in 2024 from 5.8% in 2023, marking the highest level since 2020 when China’s strict COVID measures had a significant impact on the economy.
The press release said:
“Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend. Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage."
Despite the revised outlook, Fitch affirmed China’s IDR rating at ‘A+’, suggesting a potential downgrade in the medium term.
LaToya Harding
Asia and US stocks
Stocks in Asia were mixed overnight with the Nikkei (^N225) down 0.5% on the day in Japan, and the Hang Seng (^HSI) rising 1.8% in Hong Kong. The Shanghai Composite (000001.SS) was 0.7% lower by the end of the session.
Across the pond on Wall Street, the S&P 500 (^GSPC) edged up by 0.1% to 5,209.91 after barely moving the day before.
Meanwhile, the Dow Jones Industrial Average (^DJI) slipped less than 0.1% to 38,883.67, and the tech-heacy Nasdaq Composite (^IXIC) rose 0.3% to 16,306.64.
Treasury yields eased in the bond market ahead of Wednesday’s key US inflation report. The yield on benchmark 10-year US Treasury bonds dipped to 4.35% from 4.42% late on Monday.
LaToya Harding
Coming up...
Good morning, and welcome to our live markets blog. As usual we will be covering what's moving markets, and what's happening across the global economy.
Here's a quick look at what's on the agenda for today:
7am: Trading updates: Tesco, M&C Saatchi
7am: Sweden’s GDP report for February
12pm: US weekly mortgage applications
1.30pm: US inflation report for March
2.45pm: Bank of Canada interest rate decision
7pm: US FOMC Interest Rate Minutes
Watch: What is a recession and how do we spot one?
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Wall Street's main indexes advanced on Thursday, a day after the Federal Reserve left interest rates unchanged and allayed worries around potential rate hikes, with focus moving to a crucial job report later in the week. While Fed Chair Jerome Powell indicated that stubbornly high inflation would see a long-expected U.S. rate cut pushed back, he refused to entertain talk that rates might actually need to go up again. "The outcome of the (Fed) statement, plus the press conference was for slightly more rate cuts to be priced in, not necessarily sooner, but by the end of the year," said Brian Nick, senior investment strategist at the Macro Institute.
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