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London open: Property stocks lift markets as UK inflation falls
The FTSE 100 rose on Wednesday morning as an unexpected drop in UK core inflation raised hopes that tomorrow’s anticipated interest-rate hike by the Bank of England would be its last in the current cycle.
Housebuilders and real estate stocks rose strongly on the news, with higher rates having hammered bottom lines and property valuations over the past year. Shortly after the open, London’s benchmark index was up 0.5% at 7,701.
FOMC and BoE in focus
The Bank of England meets on Thursday and is widely expected to hike interest rates by a further 25 basis points to 5.5%, but a downside surprise in UK inflation data for August could prevent policymakers from further tightening beyond September.
The year-on-year change in the consumer price index eased to 6.7% last month, from 6.8% in July and surprising economists who had forecast a slight tick-up to 7.1%. Core inflation dropped to 6.2% in August, from 6.9% the month before – this is still more than three times the BoE’s target but a strong step in the right direction and well below the 6.8% reading expected.
“What [the data] does support is the recent market pricing favouring a one-and-done hike in September and no more thereafter,” said Neil Wilson, analyst at Markets.com. “With the Fed about to pause and the ECB signalling it thinks it is done with hiking, the BoE won’t want to be the outlier.”
Meanwhile, the Federal Open Market Committee meeting kicked off on Tuesday afternoon and will conclude later today – though the policy decision and statement will not come out before the closing bell in London.
“A pause is still widely expected but it’s going to be the accompanying commentary which will set the tone, with investors on tenterhooks about what the Fed’s next steps will be and when cuts will be on the agenda,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Pearson tanks on CEO exit
Shares in educational publisher Pearson dropped nearly 5% after the company announced the exit of its chief executive Andy Bird. Bird joined as Pearson’s boss in October 2020 from Walt Disney, and the stock has jumped by nearly two thirds under his leadership. Pearson said that Microsoft executive Omar Abbosh would take Bird’s place in early 2024 as he retires.
Property stocks were hot early on after the surprise drop in UK inflation, with Taylor Wimpey, Barratt Developments, Berkeley, Land Securities, SEGRO and Rightmove among the best performers on the FTSE 100. FTSE 250 peers Persimmon, Redrow and Bellway were also putting in decent gains.
Global investment manager M&G was in demand after posting stronger-than-expected interim profits. Adjusted operating profits came in at £390m (consensus: £284m) as the firm said it was on track to meet its 2024 operating capital generation target of £2.5bn.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Taylor Wimpey Plc | +4.51% | +5.20 | 120.50 |
| 2 |  |
British Land Company Plc | +4.40% | +13.60 | 322.70 |
| 3 |  |
Kingfisher Plc | +4.11% | +8.50 | 215.30 |
| 4 |  |
Barratt Developments Plc | +4.03% | +17.90 | 462.40 |
| 5 |  |
Persimmon Plc | +3.87% | +40.50 | 1,087.00 |
| 6 |  |
Land Securities Group Plc | +3.60% | +21.00 | 603.80 |
| 7 |  |
Tui Ag | +3.38% | +16.20 | 496.00 |
| 8 |  |
Easyjet Plc | +3.34% | +14.10 | 436.70 |
| 9 |  |
International Consolidated Airlines Group S.a. | +3.31% | +5.00 | 156.25 |
| 10 |  |
Hargreaves Lansdown Plc | +3.19% | +25.60 | 828.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Pearson Plc | -3.60% | -31.80 | 852.20 |
| 2 |  |
Bp Plc | -1.70% | -8.90 | 515.90 |
| 3 |  |
Bae Systems Plc | -1.61% | -17.00 | 1,042.00 |
| 4 |  |
Shell Plc | -1.55% | -40.50 | 2,572.50 |
| 5 |  |
Wpp Plc | -1.41% | -10.80 | 754.20 |
| 6 |  |
Tesco Plc | -1.28% | -3.50 | 269.60 |
| 7 |  |
Smurfit Kappa Group Plc | -1.10% | -32.00 | 2,868.00 |
| 8 |  |
Mondi Plc | -0.91% | -12.50 | 1,362.00 |
| 9 |  |
Fresnillo Plc | -0.86% | -5.00 | 574.60 |
| 10 |  |
Glencore Plc | -0.70% | -3.25 | 460.40 |
US close: Stocks weaker as Fed policymakers meet
Wall Street’s equity markets experienced a downturn on Tuesday as jittery traders, closely watching the Federal Reserve’s two-day policy meeting, caused stocks to retreat by the end of the trading session.
By the close, the Dow Jones Industrial Average saw a slight decrease of 0.13%, finishing the day at 34,517.73, while the broader S&P 500 declined 0.22%, closing at 4,443.95.
The tech-heavy Nasdaq Composite Index was not immune to the trend either, ending the session down 0.23% at 13,678.19.
The dollar was steady against sterling on the currency front, last trading at 80.69p.
The greenback meanwhile weakened 0.02% against the euro to 93.62 euro cents, while it slid 0.07% on the yen to change hands at JPY 147.75.
“All eyes are on Wednesday’s Fed rate decision, with the central bank expected to keep rates steady,” said IG senior market analyst Axel Rudolph.
“Comments regarding its future policy path will be closely monitored, though.
“Another rate hike later this year isn’t off the table given the higher oil price is likely to increase inflationary pressures.”
Fed set to hold steady on interest rates, with possible future hike
Ahead of the end of its policy meeting, the Federal Reserve’s policymakers were widely expected to maintain its official short-term interest rates at a range of 5.25% to 5.5%.
However, there was a palpable anticipation in the financial sphere that it could be leaning towards an additional 25 basis point increase before the end of the year.
Additionally, several financial experts predicted that the central bank could adjust the forecasted rate level for the close of 2024 upwards, settling at approximately 4.875%.
Elsewhere, the US housing sector experienced a significant decline in homebuilding activities last month, as the Department of Commerce revealed.
The seasonally-adjusted data displayed a substantial month-on-month dip of 11.3% in housing starts, translating to an annual rate of 1.283 million – a figure that notably missed the consensus projection of 1.439 million.
Contrary to the downturn, housing permits witnessed a considerable surge, rising 6.9% compared to the prior month and surpassing the consensus forecast with a rate of 1.543 million.
A detailed regional breakdown showed that housing starts dropped nationally, with the Northeast being the only exception, registering a modest increase of 1.0%.
While the single-family housing starts recorded a smaller monthly drop of 4.3%, reaching a rate of 941,000, permits for the category marked a growth of 2.0%, tallying 949,000.
Equities show mixed performance with Instacart in focus
In equity markets, Maplebear registered an impressive gain of 12.33%.
The company, which owns delivery service Instacart, enjoyed a favourable reception on its debut day at the Nasdaq, closing notably higher.
On the downside, energy giant Chevron ended the day marginally in the negative territory, declining by a minimal -0.01%.
The subtle drop followed its CEO, Mike Wirth, making headlines on Bloomberg TV just a day prior, sharing that crude oil prices might soon revisit the $100 per barrel mark.
However, some market analysts argued that anticipated fresh oil supplies outside the OPEC+ realm could mitigate prices in the forthcoming year.
Satellite launch firm Rocket Lab slid 7.54% after a satellite launch at its New Zealand facility failed.
Media and entertainment behemoth Walt Disney decreased 3.62% amid speculations that it could substantially ramp up its investments in parks and resorts over the next 10 years.
Wednesday newspaper round-up: Oil prices, IPO market, Tony Blair
Rishi Sunak is facing a fresh setback to his target of halving inflation as oil prices hit $95 for the first time this year. The price of Brent crude closed in on $96 per barrel on Tuesday, the highest level since November 2022 as Russia and Saudi Arabia conspire to limit production and push up global costs. Inflation figures published on Wednesday [today] are expected to show the first acceleration in consumer prices since February. Analysts have forecast a 7.1pc rise for August on the year, up from July when consumer price inflation came in at 6.8pc. – Daily Telegraph
San Francisco-based Instacart’s initial public offering was priced at the top end of its $28 to $30 price range, raising a total of $660 million, out of which $237 million will go to investors who sold their shares in the flotation. It gave the company a valuation of nearly $9.9 billion, a fraction of the $39 billion it was worth in 2021, the company’s last funding round. Instacart’s strong debut, along with that of Arm, the British technology chip designer, last week, could encourage other startups to test the waters and potentially revive the IPO market after a near 18-month dry spell. – The Times
Tony Blair helped broker Keir Starmer’s meeting with Emmanuel Macron yesterday as part of secret plans to ‘reverse Brexit’, it emerged last night. A Whitehall source said the former prime minister had used his extensive EU contacts book to arrange the meeting on a day when the bloc released plans that could see Britain effectively rejoin the EU as an ‘associate member’. The source said Sir Tony was ‘convinced that Brexit is now a vote-winner for Labour’ and was pushing his successor to open the door to reversing it. – Daily Mail
Revolut is delaying its results for a second year in a row as pressure mounts on the former fintech darling. The company was due to publish its figures at the end of September, nine months after the end of the 2022 financial year. But it has now been given until the end of December to post its numbers on Companies House – repeating the extension it was given for its 2021 results last year. – Daily Mail
After the staff shortages, the strikes, the difficult restart following the Covid-19 travel restrictions and the airline complaints, Heathrow has regained its prepandemic status as the world’s most-connected airport. In a further boost for Europe’s largest airport, Heathrow in west London is pulling away from two of its main rivals on the European mainland, Frankfurt and Paris Charles de Gaulle, for international travellers’ business. – The Times
