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London open: Stocks fall as inflation data dashes rate cut hopes
London stocks fell in early trade on Wednesday as data showed that inflation fell less than expected in April, dashing hopes of a summer rate cut.
At 0820 BST, the FTSE 100 was down 0.6% at 8,369.40.
Figures released earlier by the Office for National Statistics showed that consumer price inflation fell in April to its lowest level in more than three years as energy costs declined.
Consumer price inflation dropped to 2.3% from 3.2% the month before, hitting its lowest level since July 2021 and edging closer to the Bank of England’s 2% target. However, it was above the 2.1% expected.
The easing reflected large downward effects from gas and electricity after Ofgem lowered the energy price cap in April. Ofgem estimated that for an average household paying by direct debit for dual fuel, this equated to £1,690, a fall of £238 over the course of a year.
The data showed that food prices slowed to the lowest annual rate since November 2021. Prices of food and non-alcoholic beverages rose by 2.9% in the year to April, down from 4% in March. The rate has eased for the 13th consecutive month from a recent peak of 19.2% in March 2023, the highest annual rate seen for over 45 years.
However, services inflation printed at 5.9%, down from 6% in March but higher than the 5.4% expected and above the Bank of England’s forecast of 5.5%.
Core inflation – which excludes energy and food prices – fell to 3.9% from 4.2%, but was above the 3.6% forecast.
ONS chief economist Grant Fitzner said: “There was another large fall in annual inflation led by lower electricity and gas prices, due to the reduction in the Ofgem energy price cap.
“Tobacco prices also helped pull down the rate, with no duty changes announced in the Budget.
“Meanwhile food price inflation saw further falls over the year.
“These falls were partially offset by a small uptick in petrol prices.”
Paul Dales, chief UK economist at Capital Economics, said the smaller-than-expected fall in CPI inflation makes a June rate cut unlikely and casts some doubt over August too.
“To some extent, it also makes our forecast that rates will fall from 5.25% now to 3.00% next year look more challenging,” he added.
Separate figures from the ONS showed the government borrowed £20.5bn in April – the fourth highest borrowing figure for that month since records began in 1993.
Borrowing in April was up £1.5bn on the same month a year earlier and £1.2bn above the Office for Budget Responsibility’s £19.3bn forecast.
In equity markets, housebuilders were among the worst performers as rate cut expectations were pushed back, with Persimmon, Taylor Wimpey, Barratt, Redrow, Crest Nicholson and Bellway all weaker.
SSE lost ground as it posted a decline in full-year operating profit.
RS Group tumbled as it said annual profits dropped by a quarter. The industrial and electrical products provider – formerly Electrocomponents – pinned the blame on weakness in global industrial production and the unwinding of unusual post-pandemic trading tailwinds.
Adjusted operating profit slumped by 25% on a like-for-like basis to £312m in the 12 months to 31 March, as LFL revenues fell 8% to £2.94bn and the adjusted operating profit margin fell to 10.6% from 13.5%.
On the upside, Marks & Spencer surged as it reinstated its dividend and posted a jump in full-year sales and profits as the retailer’s turnaround efforts bore fruit.
Pub group Mitchells & Butlers also rallied after saying that full-year results were set to be at the top end of consensus expectations as it reported a rise in first-half profit.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Marks And Spencer Group Plc | +7.96% | +21.80 | 295.60 |
| 2 |  |
Auto Trader Group Plc | +1.68% | +12.20 | 738.80 |
| 3 |  |
British Land Company Plc | +1.62% | +6.40 | 401.20 |
| 4 |  |
Lloyds Banking Group Plc | +1.57% | +0.88 | 57.06 |
| 5 |  |
Bt Group Plc | +1.33% | +1.70 | 129.70 |
| 6 |  |
Severn Trent Plc | +1.22% | +32.00 | 2,645.00 |
| 7 |  |
Admiral Group Plc | +1.17% | +32.00 | 2,765.00 |
| 8 |  |
Ocado Group Plc | +1.15% | +4.10 | 359.10 |
| 9 |  |
Carnival Plc | +1.15% | +13.00 | 1,143.50 |
| 10 |  |
Tesco Plc | +0.96% | +3.00 | 314.90 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
St. James’s Place Plc | -3.43% | -16.40 | 461.60 |
| 2 |  |
Antofagasta Plc | -2.53% | -61.00 | 2,349.00 |
| 3 |  |
Persimmon Plc | -2.47% | -36.00 | 1,419.00 |
| 4 |  |
Sse Plc | -2.31% | -41.50 | 1,757.50 |
| 5 |  |
Glencore Plc | -1.88% | -9.40 | 490.50 |
| 6 |  |
Fresnillo Plc | -1.82% | -11.50 | 620.50 |
| 7 |  |
Bp Plc | -1.75% | -8.60 | 482.20 |
| 8 |  |
Taylor Wimpey Plc | -1.74% | -2.55 | 144.40 |
| 9 |  |
Legal & General Group Plc | -1.58% | -4.00 | 248.40 |
| 10 |  |
3i Group Plc | -1.55% | -46.00 | 2,914.00 |
US close: S&P 500 and Nasdaq set new highs as eyes turn to Nvidia
US stocks edged higher on Tuesday, with the S&P 500 and Nasdaq both reaching new heights, though gains were modest as investors showed caution ahead of Nvidia’s blockbuster earnings and minutes from the latest Federal Reserve policy meeting.
Despite a subdued start, the S&P 500 rose 0.25% to a new high of 5,321.41 – its 24th record close of the year so far – while the Nasdaq Composite gained 0.22% to a fresh peak of 16,832.62.
Meanwhile, the Dow finished 0.17% higher at 39,872.99. The index pulled back the previous session after closing above the 40,000 mark for the first time last Friday.
“Today provides markets with their final chance to position themselves ahead of tomorrow’s pre-open release of earnings from Nvidia, with the tech giant providing perhaps the final major hurdle to overcome for first quarter earnings season,” said Joshua Mahony, chief market analyst at Scope Markets.
On the macro front, Federal Reserve governor Christopher Waller said he needs to see “several more months” of good inflation data before even considering backing interest rate cuts, while Atlanta Fed president Raphael Bostic said he expects to see inflation continuing to ease but cautioned that the central bank must be careful when it comes to its first rate move.
All eyes on Nvidia
Chipmaker Nvidia, which reports quarterly results on Wednesday, is largely seen as the posterchild for the massive surge in US equity markets so far this year, as investors continue to pour into names in the AI space. The stock rose 0.6% on Tuesday to a new record high, having gained 20% over the past month.
“This year is expected to see Nvidia attempt to double its earnings per share, with the $12.96 reported for 2023 expected to surge into a figure closer to $25.15,” Mahony from Scope Markets said. “However, the dramatic gains seen over the past year provide a tough backdrop for the business to operate within, as double-digit quarterly gains are the bare minimum.”
JPMorgan Chase & Co was bouncing back after dropping sharply on Monday on the back of comments from boss Jamie Dimon, who hinted that he may leave the firm within five years (earlier than expected) and said that the company wouldn’t be repurchasing as much stock at current levels.
Shares in home improvement retailer Lowe’s were lower despite better-than-expected first-quarter earnings and revenue results, while cybersecurity company Palo Alto Networks dropped after underwhelming with in-line current-quarter guidance.
On the upside, retailer Macy’s topped earnings expectations with its latest quarterly numbers as its new turnaround plan started to bear fruit, while Autozone missed estimates with net sales and earnings growth.
Wednesday newspaper round-up: Anglesey power station, electric cars, Eurostar passengers
Ministers have earmarked north Wales as the site of a large-scale nuclear power plant, which is part of plans to resuscitate Britain’s nuclear power ambitions. Wylfa on Anglesey (Ynys Môn) has been named as the preferred site for the UK’s third major nuclear power plant in a generation, coming after EDF’s Hinkley Point C nuclear plant, which is under construction in Somerset, and its Sizewell C nuclear project planned for Suffolk. – Guardian
Hybrid and electric cars are more likely to strike pedestrians than petrol or diesel vehicles, particularly in towns and cities, according to an analysis of British road traffic accidents. Data from 32bn miles of battery-powered car travel and 3tn miles of petrol and diesel car trips showed that mile-for-mile electric and hybrid cars were twice as likely to hit pedestrians than fossil fuel-powered cars, and three times more likely to do so in urban areas. – Guardian
A bank boss who earns £3.3m a year has admitted he only took the job on condition that he was allowed to work from home. Mike Regnier, the chief executive of Britain’s fifth-largest lender Santander UK, said he was convinced to accept the role after the bank allowed him to work out of the office most of the time. The 52-year-old spends up to two days a week working in the bank’s main offices in Milton Keynes and London, and the rest of the week from his home in Harrogate, North Yorkshire, or travelling the country. – Telegraph
Eurostar passengers at St Pancras station will be forced to negotiate a five-step check-in process under strict new EU rules, providing their fingerprints and a mugshot twice and answering a series of questions on the nature of their trip. People planning to travel through the Channel Tunnel will be sent a guide to the new system as soon as they book, including a flow chart and checklist detailing each stage of the process and explaining why it is being implemented. – Telegraph
The seaside resorts of Bournemouth, Sidmouth and Bexhill-on-Sea have been identified as among the fastest-growing engines of small-scale British enterprise. Traditionally better known for their holidays and beaches, the towns are attracting a new generation of entrepreneurs. Analysis of digital data by GoDaddy, the website hosting company, found that Suffolk Coastal, which includes Felixstowe, saw the density of microbusinesses increase by 54 per cent in the 12 months until April. That is more than ten times the average UK growth rate of 5 per cent. – The Times
