Stock prices in London opened mixed on Wednesday, as UK consumer price inflation ebbed, but not by how much economists were expecting, prompting investors to rethink their Bank of England interest rate expectations.
The reading followed numbers showing UK wage growth was loftier than expected in the three months to February. Sterling traded higher early Wednesday.
The FTSE 100 index opened just 1.54 points higher at 7,821.90. Stacked with international earners, a stronger pound is a headwind for London’s blue-chip index.
The FTSE 250 was down 29.46 points, 0.2%, at 19,315.08, and the AIM All-Share was up 1.86 points, 0.3%, at 740.14.
The Cboe UK 100 rose 0.1% to 781.35, the Cboe UK 250 was 0.2% lower at 16,721.39, and the Cboe Small Companies was up 0.1% at 14,701.72.
In European equities on Wednesday, the CAC 40 in Paris rose 0.6% and the DAX 40 in Frankfurt added 0.2%.
The Dow Jones Industrial Average ended 0.2% higher on Tuesday in New York. The S&P 500 fell 0.2% and the Nasdaq Composite lost 0.1%.
In Tokyo, the Nikkei 225 fell 1.3%. In China, the Shanghai Composite ended 2.1% higher, though the Hang Seng in Hong Kong fell 0.1%. The S&P/ASX 200 fell 0.1% in Sydney.
Against the dollar, sterling rose to $1.2452 early Wednesday, from $1.2435 at the time of the London equities close on Tuesday. The euro was flat at $1.0629. Against the yen, the buck bought JP¥154.61, rising from JP¥154.51.
The UK consumer price inflation rate was a touch loftier than expected last month, numbers on Wednesday showed, though it cooled to its tamest level since September 2021.
According to the Office for National Statistics, the year-on-year rate of consumer price inflation ebbed to 3.2% in March, from 3.4% in February.
A slowdown to 3.1% was expected, according to FXStreet cited consensus, however. Nonetheless, it was still the tamest rate of inflation since it sat at 3.1% in September 2021.
The ONS said food price growth slowed in March, key to the rate of inflation easing.
‘Prices for food and non-alcoholic beverages rose by 4.0% in the year to March 2024, down from 5.0% to February. The March figure is the lowest annual rate since November 2021,’ the ONS said.
Market Financial Solutions analyst Paresh Raja commented: ‘Inflation remains above the Bank of England’s target of 2%, delaying an eagerly awaited rate cut for another couple of months at least. The over-riding sense is that the base rate will be cut in June, although all eyes are on the US Fed, with the Bank of England unlikely to act until cuts are made ’across the pond’.’
Still to come on Wednesday, Bank of England Governor Andrew Bailey speaks at an event in Washington at 1700 BST. Megan Greene, part of the rate-setting Monetary Policy Committee, speaks at the same event at 1305 BST.
Dutch bank ING said UK data this week has dashed rate cut hopes.
‘The Bank of England has pinned the timing of the first rate cut on wage growth and services inflation. The former came in hotter than expected in data released on Tuesday, and now the latest data on the latter has come in stickier than expected too. The result is that markets are now only full pricing the first rate cut in November,’ ING analysts said.
The US Federal Reserve’s ongoing fight against inflation could take ‘longer than expected,’ the head of the US central bank said Tuesday, further paring back the chances of early rate cuts.
But three months of higher inflation data since the start of 2024 have threatened to undermine the expectation of interest rate cuts this year, with one senior Fed policymaker recently suggesting that rates could remain at their current levels until 2025.
‘The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,’ Federal Reserve Chair Jerome Powell said during an event in Washington on Tuesday.
‘That said, we think policy is well positioned to handle the risks that we face,’ he added.
In March, Fed policymakers pencilled in three rate cuts for this year, leading markets to price in the first of them as early as June.
But hot March consumer inflation data caused many traders to reevaluate and push back their expectations.
In London, retailers traded largely lower in the wake of the data. Next lost 1.2%, while Marks & Spencer fell 1.1%.
Shielding the FTSE 100 from a decline, however, was the mining sector. Anglo American rose 2.6%. Rio Tinto added 1.9%.
Rio Tinto rose despite it reporting lower quarterly iron ore shipments and production at its key Pilbara operation.
Antofagasta added 1.0%. It said copper output was weaker in its first-quarter, though it maintained guidance.
Mining shares had fallen on Tuesday following mixed Chinese data. China is a major buyer of minerals. The nation’s gross domestic product grew in the first-quarter, though industrial production and retail sales readings were weaker than expected.
Asos shot up 9.3% as it said it is becoming ‘faster and more agile’. The fashion retailer said revenue in the 26 weeks to March 3 fell 18% to £1.51 billion from £1.84 billion a year earlier. Its pretax loss, however, narrowed to £270.0 million from £290.9 million.
Asos hailed ‘disciplined inventory and cost management’.
CEO Jose Calamonte said: ‘At the beginning of this year we explained that FY24 would be a year of continued transformation for ASOS as we take the necessary actions to deliver a more profitable and cash generative business. Under our back to fashion strategy, we set out three priorities for the year - to offer the best and most relevant product, to strengthen our relationship with customers and to reduce our cost to serve. We have delivered on each of these in the first half of the year.’
It reiterated its guidance for a 5% to 15% sales decline for the full-year.
It named Dave Murray as chief financial officer, with effect April 29. Interim CFO Sean Glithero will stick around for a handover period but depart the company thereafter.
Liontrust rose 3.1%, reporting a fall in assets under management and advice over its financial year, but noting ‘continuous flows’ into its European Dynamic Fund. It also reported ‘positive net sales by the Global Innovation team’.
Assets under management and advice as of March 31 totalled £27.82 billion, down 11% from £31.43 billion at the start of the financial year. It suffered £6.08 billion worth of net outflows during the year, including £1.21 billion during the fourth-quarter. The fourth-quarter outcome was better than the £1.66 billion worth of net outflows it reported for the third.
Chief Executive Officer John Ions said: ‘Liontrust has improving investment performance in the short term as well as excellent performance over the long term and it appears the UK and other developed economies have reached peak interest rates. This follows a period in which many of our core investment strategies, notably quality growth, small/mid-caps and UK equities, have been out of favour, impacting both performance and flows.
‘Of our product range, we have seen continuous flows into the European Dynamic Fund - with its AuMA increasing from £747 million as at 31 March 2023 to more than £1.4 billion as at 31 March 2024 - and positive net sales by the Global Innovation team in the period. We have made continued progress against our strategic objectives, enabling us to seek to generate growth through an expanding product range, distribution and client base.’
Anglo Asian Mining fell 5.5% as it reported a decline in first-quarter output due to its ‘operations remaining partially shut down’.
Anglo Asian is awaiting permission in Azerbaijan ‘to raise its tailings dam wall’, which would get output back to a normal level.
Total production in the first-quarter declined to 2,548 gold equivalent ounces, from 10,969 a year earlier.
‘Amid what has been a challenging time for the company, we have made important operational progress and our portfolio of development assets is progressing in line with our expectations. We await government permission to raise our tailings dam wall, a necessary step for resuming normal production levels and our ability to issue production guidance for the year. We anticipate the permit will be issued shortly and this will enable us to take advantage of the current strong metal prices,’ Chief Executive Reza Vaziri said.
It now expects first production from the Gilar mine in the fourth-quarter, and not the third.
A barrel of Brent oil fell to $89.46 early Wednesday, from $90.21 at the European equities close Tuesday. Gold traded at $2,378.56 an ounce, falling slightly from $2,379.66.
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