New York Wall Street
Stocks rise ahead of US inflation data / Image source: Adobe

London’s FTSE 100 edged slightly lower going into Thursday afternoon, but trade in Paris and Frankfurt was more positive, ahead of a slew of US data.

The FTSE 100 index fell just 3.77 points to 7,768.40. The FTSE 250 climbed 58.38 points, 0.3%, to 19,622.30, and the AIM All-Share was flat at 738.82.

The Cboe UK 100 was down 0.1% at 777.94, the Cboe UK 250 added 0.4% at 17,001.13, and the Cboe Small Companies was down 0.2% at 14,683.40.

In European equities on Thursday, the CAC 40 in Paris surged 0.8%, while DAX 40 in Frankfurt rose 0.3%.

The pound was quoted at $1.2808 early Thursday afternoon, up from $1.2798 at the London equities close on Wednesday. The euro stood at $1.0940, down from $1.0945. Against the yen, the dollar was trading at JP¥147.71, largely flat from JP¥147.70.

Eyes turn to a batch of US data and what it can mean for Federal Reserve interest rates.

There will be a customary update on the jobs market, through the initial jobless claims reading at 1230 GMT, as well as an insight into the health of the consumer, with retail sales data. In addition, the latest producer price reading is reported in the early afternoon.

The next Federal Reserve decision is on Wednesday.

‘There is no chance that the Fed cuts rates next week,’ Brown Brothers Harriman analysts commented.

‘Odds of a May cut are now below 15% while odds of a June cut are below 75%. Furthermore, markets are basically back to matching the Fed’s outlook for three cuts this year. The momentum in the US economy remains pretty strong, but a lot can happen between now and May or June that could impact boost those odds.’

BBH analysts continued: ‘A couple of soft CPI prints would change things but as we pointed out earlier this week, low base effects suggest upside risks for year-on-year inflation over the next 3-4 months. Rather, it would probably take some weakness in the real economy to have an impact on Fed easing expectations, perhaps from some further softening of the labour market and/or weakness in consumption. Today’s retail sales data will be important.’

Retail sales are expected to have risen 0.8% on month in February, following a 0.8% fall in January from December, according to consensus cited by FXStreet.

Ahead of the US data, gold prices traded slightly lower. Gold was quoted at $2,168.68 an ounce early Thursday afternoon, down from $2,173.55 at the time of the London equities close on Wednesday.

Tickmill analyst Joseph Dahrieh commented: ‘The asset could continue to trade sideways overall ahead of the Federal Reserve’s meeting next week but could see some volatility as traders react to the data releases expected in the coming days. However, gold could see some price corrections if new data reinforces expectations that the Federal Reserve could keep its interest rates unchanged for a longer period of time, in particular as traders could move to secure their profits after the strong gains recorded since the beginning of this month.’

Brent oil was quoted at $84.64 a barrel on Thursday afternoon, climbing from $83.50 at the time of the London equities close on Wednesday.

In London, Miner Anglo American fell 4.9%, lender NatWest declined 4.3% and property investor Segro lost 2.4%. The trio went ex-dividend, meaning new buyers do not qualify for their latest payouts.

OBS Group plunged 16%. The Chatham, England-based mortgage lender, formerly known as OneSavings Bank, said pretax profit fell 30% to £374.3 million in 2023 from £531.5 million in 2022, as net interest income declined by 7.2% to £658.6 million down from £709.9 million.

Chief Executive Andy Golding explained that, as previously disclosed, the results were significantly hurt by the adverse effective interest rate adjustment, relating primarily to a shorter time spent on the reversion rate by its Precise Mortgages customers.

Despite the lower profit, OSB increased its annual dividend to 32.0p per share from 30.5p, though in 2022 OSB also paid a special dividend of 11.7p. OSB said it would launch a new share buyback programme of £50 million.

Looking ahead, OSB said it expects its underlying net interest margin to be broadly flat compared to the 2023 underlying NIM of 251 basis points, reflecting the impact of a higher cost of funds and the full-year impact of some lower margin lending in 2023.

Analysts at Shore Capital Markets commented: ‘OSB’s has reported full year results to 31 December 2023 that were ahead of expectations, but net interest margin guidance is lower than we and consensus had expected, which is likely to drive sizeable forecast downgrades.’

Trainline said its revenue growth will beat its forecast, giving the shares another spring to their step. The stock rose 12%.

Revenue in the financial year that ended February 29 rose 21% to £397 million from £327 million. Trainline previously had guided for a rise between 15% and 20%.

‘We are ’buy’ rated on Trainline shares because we feel positive investment attributes (strong UK market position, digital channel shift, strong ESG credentials, European prospects) outweigh associated risks and valuation considerations,’ Stifel analysts said.

One such risk that has faded is one in the UK. Shares in Trainline have risen roughly 30% since mid-December, when the UK government announced it will no longer pursue creating a ticket retailing website and app.

The proposal for a Great British Railways app was first mooted in May 2021 as part of a white paper. GBR is a planned state-owned body that will oversee UK rail transport.

Elsewhere in London, International Personal Finance jumped 12%. The company, which offers unsecured consumer credit in nine countries, said 2023 pretax profit landed ahead of its ‘internal plans’, rising 8.4% to £83.9 million from £77.4 million.

Revenue rose 19% to £767.8 million from £645.5 million. IPF lifted its final dividend by 11% to 7.2p per share from 6.5p. Its annual dividend was 12% higher at 10.3p from 9.2p.

In New York, the Dow Jones Industrial Average is called up 0.1% on Thursday. The S&P 500 is called to open 0.1% lower, and the Nasdaq Composite down 0.3%.

The US House of Representatives overwhelmingly approved a bill that would force TikTok to sever ties with its Chinese parent company or be banned in the US.

ING analysts commented: ‘The big news overnight for Chinese markets was the US House passing a bill in the interest of data security to ban TikTok from app stores unless it is sold by ByteDance, its parent company, ostensibly to a US-controlled entity. The policy still needs to be passed by the Senate and signed into law by President Biden.

‘This move is of major significance for several reasons. It is a highly visible sign of US-China tensions in an election year, where we are likely to see more measures as policymakers try to look tough on China to garner support. If this ban is successfully enforced, there is concern that this may set a precedent for this sort of ultimatum being given to other businesses.’

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Issue Date: 14 Mar 2024