The FTSE (^FTSE) and European stocks were higher on Wednesday as traders awaited the data on the latest US inflation report.
The CPI rate is expected to show a small increase in the pace of price rises this afternoon, rising from 3.1% to 3.4%. However, core inflation could slow slightly from 3.8% to 3.7%.
London’s benchmark index was 0.6% higher in early trade
Germany’s DAX (^GDAXI) rose 0.7% and the CAC (^FCHI) in Paris headed 0.6% into the green
The pan-European STOXX 600 (^STOXX) was up 0.7% in early trade
Wall Street is set to open higher as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green
Tesco (TSCO.L) climbed 1% as profits rose by almost 160%
Fitch downgrades China’s outlook to negative
Dan Coatsworth, investment analyst at AJ Bell, said: “The central bank wants to see sustained evidence of inflation coming down and that doesn’t appear to be on the menu. The signs are clear for investors to see, but many have been choosing to ignore them.
“The Fed putting it into black and white could be a difficult pill for investors to swallow, so brace yourself for turbulence on the market this week.”
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Tesco profits soar 160%
Exterior view of a UK Tesco superstore (supermarket) with parked cars in the outdoor car park. (Lee Hudson) Tesco (TSCO.L) shares climbed as much as 1% in London on Wednesday after it revealed a 160% rise in pre-tax profits, soaring from 882m in 2022 to £2.3bn.
Sales at Britain’s largest supermarket rose by 4.4% to £68.2bn in the year to 24 February while more than 4,000 products were cheaper at the end of the year, with an average price cut of around 12%.
It is now expecting retail adjusted operating profit of at least £2.8bn in 2024-25.
Tesco also predicted that food inflation will stabilise in low single digits for the rest of the year, as it plans to make £500m in efficiency savings in the year ahead.
Retail adjusted operating profit, which excludes results from Tesco Bank, rose 10.9% to £2.76bn.
“Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year,” said Ken Murphy, chief executive.
“We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices.”
Fitch downgrades China outlook to negative
A woman reacts near a dragon sculpture outside a restaurant in Beijing, Tuesday, April 9, 2024. China’s Finance Ministry has denounced a report by Fitch Ratings that kept its sovereign debt rated at A+ but downgraded its outlook to negative, saying in a statement that China’s deficit is at a moderate and reasonable level and risks are under control. (AP Photo/Ng Han Guan) (Ng Han Guan, Associated Press) Fitch has downgraded its long-term outlook on China to negative while maintaining the country’s A+ credit rating.
The US-based rating agency said the adjustment was driven by the country’s bealeagured property sector, which has introduced increased uncertainty.
Fitch predicted a rise in the general government deficit to 7.1% of GDP in 2024 from 5.8% in 2023, marking the highest level since 2020 when China’s strict COVID measures had a significant impact on the economy.
The press release said:
“Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend. Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage.”
Despite the revised outlook, Fitch affirmed China’s IDR rating at ‘A+’, suggesting a potential downgrade in the medium term.
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