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London open: Stocks edge lower after inflation data, ahead of Fed
London stocks edged lower in early trade on Wednesday as investors mulled the latest UK inflation reading and looked ahead to a policy announcement from the US Federal Reserve.
At 0835 BST, the FTSE 100 was down 0.2% at 8,294.56.
Data released earlier by the Office for National Statistics showed that consumer price inflation was unchanged at 2.2% in the year to August, in line with expectations and above the BoE’s 2% target.
Services inflation rose to 5.6% in August from 5.2% in July, also as expected.
Core CPI – which excludes energy, food, alcohol and tobacco – rose to 3.6% from 3.3% in July. This was a touch above expectations of 3.5%.
ONS chief economist Grant Fitzner said: “Inflation held steady in August as various price fluctuations offset each other.
“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.
“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “Overall, a pause on interest rate cuts was already expected tomorrow and today’s release cements that view.
“We continue to assume the next 25 basis point rate interest rate cut will take place in November and that rates will be cut at alternative BoE meetings until June.”
Still to come, the Fed will make its latest policy announcement at 1900 BST.
Danske Bank said: “We expect a 25 basis point cut of the Fed Funds Rate target (to 5.00-5.25%). This morning markets price in a 65% probability for an even bigger 50bp rate cut.
“Even though the Fed will now initiate its rate cutting cycle, we do not expect changes to the pace of QT. We expect the updated rate projections to signal a total of 3x25bp rate cuts in 2024 (previously 1) followed by 6x25bp cuts in 2025 (previously 4).”
In equity markets, Legal & General fell after saying it had sold UK house builder CALA Group for £1.35bn to Ferguson Bidco, an entity owned by funds managed by Sixth Street Partners and Patron Capital.
The insurer said it would receive cash proceeds of £1.16bn, of which £500m will be paid at closing with the remaining consideration being paid over the next five years.
PZ Cussons tumbled as the Imperial Leather maker said it swung to a full-year pre-tax loss due to the devaluation of the Nigerian Naira.
On the upside, consumer goods giant Reckitt Benckiser rallied following a Bloomberg report that it has launched early discussions with potential suitors for a sale of its homecare assets, which could be worth more than £6bn.
Elsewhere, InterContinental Hotels was trading higher after an upgrade to ‘buy’ at Goldman Sachs, while Hammerson was boosted by an upgrade to ‘buy’ at Citi.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ferguson Enterprises Inc. | +1.55% | +240.00 | 15,690.00 |
| 2 |  |
Intercontinental Hotels Group Plc | +1.27% | +100.00 | 7,964.00 |
| 3 |  |
Reckitt Benckiser Group Plc | +1.06% | +49.00 | 4,659.00 |
| 4 |  |
Banco Santander S.a. | +0.79% | +3.00 | 381.50 |
| 5 |  |
Bae Systems Plc | +0.75% | +9.50 | 1,282.50 |
| 6 |  |
Marks And Spencer Group Plc | +0.62% | +2.30 | 372.60 |
| 7 |  |
Smith (ds) Plc | +0.59% | +2.80 | 481.20 |
| 8 |  |
Centrica Plc | +0.56% | +0.65 | 117.60 |
| 9 |  |
Haleon Plc | +0.53% | +2.10 | 399.10 |
| 10 |  |
Smurfit Westrock Plc | +0.51% | +18.00 | 3,580.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Halma Plc | -2.61% | -69.00 | 2,571.00 |
| 2 |  |
Legal & General Group Plc | -2.50% | -5.70 | 222.70 |
| 3 |  |
Diploma Plc | -2.03% | -94.00 | 4,538.00 |
| 4 |  |
Rentokil Initial Plc | -1.94% | -7.40 | 374.10 |
| 5 |  |
Sage Group Plc | -1.47% | -15.00 | 1,003.00 |
| 6 |  |
South32 Limited | -1.40% | -2.30 | 162.00 |
| 7 |  |
Croda International Plc | -1.38% | -56.00 | 3,999.00 |
| 8 |  |
Relx Plc | -1.34% | -49.00 | 3,599.00 |
| 9 |  |
3i Group Plc | -1.29% | -42.00 | 3,213.00 |
| 10 |  |
Bhp Group Limited | -1.28% | -26.00 | 2,005.00 |
US close: Stocks mixed as investors turn to Fed decision
Wall Street saw mixed results on Tuesday as investors awaited the Federal Reserve’s decision on interest rates, due on Wednesday.
The Dow Jones Industrial Average dipped slightly by 0.04% to close at 41,606.18.
In contrast, the S&P 500 managed a modest gain of 0.03%, finishing at 5,634.58, while the Nasdaq Composite rose by 0.2% to 17,628.06.
Market attention is focused on the Fed, with a 25-basis-point rate cut already priced in ahead of the policy meeting set to conclude on Wednesday.
However, uncertainty remains about whether the central bank will opt for a larger, 50-basis-point reduction in response to weakening economic conditions.
“Equity indices continue their bullish run … [with] the S&P 500 within a whisker of an all-time high,” said Axel Rudolph at IG earlier.
“Unexpectedly rising US August retail sales not only boosted stocks but also triggered a rebound in US Treasury yields from their one-to-two year lows.”
Retail sales rise more slowly in August
In economic news, US retail sales edged up by 0.1% in August, reaching $710.8bn, indicating cautious consumer spending.
While the increase was lower than July’s revised 1.1% gain, it surpassed economists’ expectations of a 0.2% decline.
“On its own, [the retail sales data] supports a smaller 25 bps cut rather than 50bps, but it will more likely be the state of the US labour market and the Fed’s perception of the risk of a deterioration that will drive that decision tomorrow,” said Ryan Brandham, head of global capital markets, North America, at Validus Risk Management.
Industrial production, on the other hand, showed stronger-than-expected growth, climbing 0.8% in August following a 0.6% drop in July.
The housing market also saw improvement, with the NAHB/Wells Fargo Housing Market Index rising to 41, beating the forecast of 40.
Tech stocks buoyant with Intel in focus
On the corporate front, Intel surged 2.68% after announcing the demerger of its foundry business and an expanded partnership with Amazon‘s cloud division.
The company also secured $3bn in federal grants to produce chips for the Pentagon.
Microsoft shares rose by 0.88% as it unveiled a $60bn stock buyback plan and raised its dividend by 11%.
Other tech stocks, such as Dell and Shopify, also performed well, buoyed by positive analyst ratings from Mizuho Securities and Redburn Atlantic, respectively.
Wednesday newspaper round-up: Stellantis, ITV, Philip Morris
Employers who force staff to return to the office five days a week have been called the “dinosaurs of our age” by one of the world’s leading experts who coined the term “presenteeism”. Sir Cary Cooper, a professor of organisational psychology and health at the University of Manchester’s Alliance Manchester Business School, said employers imposing strict requirements on staff to be in the office risked driving away talented workers, damaging the wellbeing of employees and undermining their financial performance. – Guardian
One of America’s biggest carmakers, Stellantis, could face fresh strikes after the United Auto Workers (UAW) announced plans for members to vote on authorizing a walkout. The UAW president Shawn Fain accused executives at the automotive giant of being “out of control” on Tuesday evening. “The company wants you to be scared,” he told his union’s members, “but we are 100% within our rights and within our power to take strike action if necessary.” – Guardian
Britain’s worklessness crisis is costing taxpayers £16bn a year through lost tax revenue and an inflated benefits bill, top economists have warned. The Institute for Employment Studies (IES) and the Commission on the Future of Employment Support warned that the country’s workforce was shrinking at the fastest rate since the 1980s, leading to a shortfall in employment-related taxes. At the same time, the number of people claiming benefits because of ill-health has also spiked, leading to a rapid rise in the cost of benefits, while a growing number has never worked. – Telegraph
The boss of ITV has hit out at plans to ban junk food adverts on TV before 9pm, warning it could force the broadcaster to make programming cuts. Dame Carolyn McCall said the company had been fighting the ban “for some time” and warned it would lead to millions of pounds in lost revenues. Speaking at the Royal Television Society convention in London on Tuesday, she said: “We’ve done loads of research to say this is not going to make a dent in childhood obesity. But it is a political thing and so we’re going to have to mitigate it in any way we can. – Telegraph
Philip Morris International has offloaded Vectura for just £150 million, three years after its contentious £1 billion acquisition of the respiratory drugs company triggered a backlash from the public health sector. The maker of Marlboro cigarettes has sold the Chippenham-based company to Molex, a US company that owns the contract development and manufacturing organisation Phillips Medisize, in a setback for its transformation away from tobacco. – The Times
