The Federal Reserve will look to inflation data and the surprising growth in US GDP when deciding its rate path at the next central bank meeting. The FTSE was up. (Xinhua News Agency via Getty Images)
The FTSE rose and US stocks finished the week in the green by the closing bell in London on Friday, as US inflation data showed moderate price increases in December, and inflation below 3% on an annual basis for the third month in a row.
Core inflation, which strips out more volatile measures from its calculations, was 2.9%, slightly weaker than the expected 3% and down from 3.2% in November.
Month-on-month, the PCE Price Index and the Core PCE Price Index both increased 0.2%.
The S&P 500 (^GSPC) rose 0.2%, the Dow (^DJI) was also up 0.3% and the Nasdaq (^IXIC) rose despite heavy selling from one if its heavyweight constituents, Intel (INTC).
The Federal Reserve will look to inflation data and the surprising growth in US GDP to round out 2023 when deciding its rate path at the next central bank meeting.
Meanwhile, the FTSE 100 (^FTSE) ended the day 1.4% higher, while Germany’s DAX (^GDAXI) was up 0.3% and the CAC (^FCHI) in Paris headed 2.4% into the green.
The pan-European STOXX 600 (^STOXX) was up 1.1% by the close.
Read more: Trending tickers: Intel, Visa, Paypal and WH Smith
The moves came as data showed that UK consumer confidence hit a two-year high in January. The monthly monitor, published by research company GfK, showed people’s views of their finances and broader economic prospects ticked up three points compared to last month, to the highest point since January 2022.
The data coincides with a confidence measure published in Europe earlier in the week which saw a larger-than-expected drop from the bloc.
The positive day in Europe comes after the ECB left interest rates unchanged at 4% on Thursday for a third consecutive meeting.
The move was widely expected by economists as it battles to bring inflation below its 2% target, reiterating its reluctance to start making cuts despite the mounting pressure to do so.
Read more: London rents reach record high of £2,631
The ECB’s deposit rate, which is paid on commercial bank deposits, was last raised in September to 4% — the highest since the euro was launched in 1999.
The rate on its main refinancing operations, which provide the bulk of liquidity to the banking system, remains at 4.5%, while the marginal lending facility, which offers overnight credit to banks, is at 4.75%.
It comes as inflation had been falling consistently in the Eurozone but saw a surprise uptick to 2.9% in December, adding fuel to its relatively hawkish position.
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Euro pain
Following the ECB’s broadcasting on its possible rate path Michael Hewson from CMC markets has the skinny on what’s happening with the euro:
The euro has been amongst the worst performers this week after yesterday’s perceived dovish pivot from the ECB yesterday, after ECB President Lagarde didn’t push back on the prospect of the idea of an early rate cut. Although we’ve had some ECB policymakers push back on that interpretation today which has pulled the euro off its 6-week lows, yields aren’t really buying it, and are only marginally higher after yesterday’s steep declines.
Central bankers will have ‘songs in their hearts’
Emailed commentary from Bill Adams, chief economist for Comerica Bank breaks down the inflation print. He reckons:
Chair Powell and the Fed’s other policymakers will come into the office for next week’s FOMC meeting with ‘songs in their hearts.’
But Chair Powell will likely still talk tough about the Fed’s inflation-cutting resolve in the January press conference.
The Fed thinks it’s important to keep convincing Americans that they are strongly committed to keeping inflation at their 2% target.
The Fed will be on hold in January, but a rate cut in March isn’t out of the question.
They’re more likely to wait until the second quarter to start reducing interest rates to less restrictive levels.
US core inflation slightly lower than expected
Inflation data coming out of the US showed that the PCE price index held steady at a rate of 2.6% year-on-year in December, the US Bureau of Economic Analysis said on Friday.
Core inflation, which strips out more volatile measures from its calculations, was 2.9%, slightly weaker than the expected 3% and down from 3.2% in November.
Month-on-month, the PCE Price Index and the Core PCE Price Index both increased 0.2%.
Stocks are slightly down ahead of market open.
US premarket
US stocks are down slightly ahead of the open across all three major indexes, with tech stock Intel (INTC) set to open almost 10% lower.
Chip maker Nvidia (NVDA) also looks set to open 0.6% lower, while Tesla (TSLA) is on the up, to the tune of 1.2%.
Recession fears plague Germany
While consumer confidence is up in the UK, it has dipped in Germany compounding fears of a recession. Here’s what GfK said:
The year 2024 is off to a very disappointing start for consumer sentiment in Germany: both economic and income expectations as well as the propensity to buy are showing noticeable losses. The consumer climate is declining significantly again after the increase in the previous month. It falls to -29.7 points in the forecast for February 2024 – a decrease of 4.3 points compared to the previous month (revised -25.4 points). This is shown by the results of the GfK consumer climate powered by NIM for January 2024. Since October 2023, it has been published jointly by GfK and the Nuremberg Institute for Market Decisions (NIM), founder of GfK.
FTSE risers and fallers
Among the top risers in the FTSE 100 today are:
Diageo (DGE.L), up 3.8%
Croda International (CRDA.L), up 3.7%
Rentokill (RTO.L), up 2.8%
And the fallers:
Sainsbury (SBRY.L), 1.5% down
M&S (MKS.L), 1.1% down
Tesco (TSCO.L), 0.8% down
Trending tickers: WH Smith
High street darling WH Smith’s (SMWH.L) stock is down 2.6% as of 9.30am despite positive numbers in its latest update.
The company said it is on track to open 110 shops this financial year as the retailer was boosted by strong UK trade.
Group revenues increased by 8% over the 20 weeks to 20 January, compared with the same period last year.
Travel sales grew by 15% over the period, with its UK travel stores benefiting from improving passenger numbers at airports.
Our other trending tickers today include: Intel, Visa and Paypal.
Overnight in Asia
While US stocks were on the up, Asian stocks were mixed again. The Nikkei (^N225) slipped 0.3% by the close while the Hang Seng (^HSI) fell 1.8% and the SSE Composite (000001.SS) rose 0.1%.
Japanese stocks pulled back after the Nikkei saw all-time highs this week, which coincided with the Bank of Japan leaving rates on hold. Ever since, hawkish comments by the central bank chief have pulled markets back down to earth.
The Hang Seng was dragged down by technology names, which knocked the Hang Seng Tech Index down by nearly 4%. Still, it remained on track for a weekly gain of 4%, its best performance in about a month.
Overnight in the US
Globally, it was a mixed night of trade as markets closed higher in the US, and on shakier footing in Asia.
US stocks rose on Thursday despite downbeat earnings from Tesla (TSLA) and following a hotter-than-expected US economic growth reading.
Dow Jones Industrial Average (^DJI) rose 0.6% while the S&P 500 (^GSPC) rose 0.5% following the benchmark’s fourth straight record close logged on Wednesday. Stocks in the tech-heavy Nasdaq Composite (^IXIC) rose about 0.2%. The S&P 500 set another closing record high finishing at 4,894.16.
An advance estimate of fourth quarter US gross domestic product (GDP) released on Thursday morning showed the economy grew at an annualized pace of 3.3%during the period, much faster than the annualized pace of 2% expected by economists.
Tesla (TSLA) warned of “notably” slower EV production growth in quarterly results that missed on profit, with CEO Elon Musk pointing to the risk that Chinese carmakers will “demolish” rivals in the absence of trade curbs. Shares of the EV maker dropped 12%, further underperforming the other “Magnificent Seven” tech-centered stocks that have driven the S&P 500’s rally.
Good morning!
Good morning from London. Lucy Harley-McKeown reporting here, following what’s moving markets today (but still thinking about what’s going to happen in The Traitors finale). Let us begin.
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