European stock markets reversed their early losses on Tuesday as UK wage growth cooled, vacancies fell, and traders digested US inflation data.
In London, the FTSE 100 (^FTSE) closed 0.2% higher, while the CAC (^FCHI) advanced 1.5% in Paris, and the Frankfurt DAX (^GDAXI) was 1.7% higher.
Across the pond, the S&P 500 (^GSPC) surged more than 2% by the time of the European close, and the tech-heavy Nasdaq (^IXIC) was 2.3% higher. The Dow Jones (^DJI) was 1.6% up in New York.
“Stock benchmarks registered modest gains on Tuesday, extending the sentiment seen in Asia overnight, with investors bracing for today’s crucial US inflation data.” Pierre Veyret, technical analyst at Activ Trades, said.
Read more: Trending tickers: Google | Vodafone | Glencore | Land Securities
“As previously said in our last report, market sentiment towards risky assets has lost a bit of its direction over the past few days after Federal Reserve officials expressed mixed hints about the future of monetary policies. With traders and investors worldwide not knowing what to believe, they will likely turn their focus back to data, making today’s inflation print crucial.”
“Simply put, if the cooling of rising price pressure is confirmed with today’s data, the prospect of a less aggressive stance from the Fed could become a reality, likely boosting appetite for stocks.”
It came as US inflation fell by more than expected, as price pressures continued to ease across the country.
The consumer prices index rose by 3.2% in the year to October, below the 3.3% forecast, and down from the 3.7% in September.
Core inflation, which strips out food and energy, fell to 4.0%, its lowest since September 2021. Energy prices fell by 4.5% over the last year, while food inflation was 3.3%.
The pound (GBPUSD=X) jumped to a two-month high on the back of the news.
Read more: UK wages grow faster than inflation
Meanwhile, workers in Britain are continuing to see their wage packets rise faster than inflation, thanks to strong pay growth and a drop in inflationary pressures.
According to the latest data from the Office for National Statistics (ONS), pay growth slowed slightly in the period from July to September, with regular pay (excluding bonuses) growing by 7.7%. This is down from 7.9% last month.
Total pay rose by 7.9%, down from 8.2%, bolstered by one-off bonus payments to civil service staff this summer. Wages lifted 1.42% after taking the current inflation level of 6.7% into account.
Read more: ISA: Call to restore real value of allowance and scrap LISA cap
The number of vacancies at UK firms also continued to tumble, its 16th consecutive period of decline as companies cut back on hiring.
In a sign that the economy was slowing, the estimated number of vacancies during the quarter to the end of October was 957,000, compared to 58,000 from May to July.
Vacancy levels fell in 16 of the 18 industry sectors, led by professional, scientific, and technical activities.
“Our labour market figures show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter,” Darren Morgan, ONS director of economic statistics, said.
“The number of job vacancies fell for the 16th straight month. Nevertheless, vacancies still remain well above their pre-pandemic levels. With inflation easing in the latest quarter, real pay is now growing at its fastest rate for two years.”
Blog close and recap
Well that’s all we have time for today. Thanks for following along, and be sure to join us again tomorrow for more.
Here’s a quick recap of some of the top stories from today…
US inflation falls to 3.2%
UK wages grow faster than inflation
Job vacancies decline for 16th consecutive time
Thames Water to pay back £74m to customers
IEA raises oil growth forecasts
Insolvencies up 18% in October
Pound rises on US inflation data
Have a good evening all!
Pfizer to cut 500 jobs in Kent
Pfizer is set to axe around 500 jobs at its Kent site. Sky News reported that the roles are to be cut as the firm is discontinuing its pharmaceutical sciences small molecule (PSSM) operations at Sandwich in Kent.
A Pfizer spokesperson said:
As previously announced, Pfizer has launched an enterprise-wide cost realignment program. Various areas of Pfizer’s global enterprise are making changes to operate more efficiently and effectively. These changes will be implemented on a rolling basis and will differ area to area.
One of the consequences of this program is a plan to consolidate our Pharmaceutical Sciences Small Molecule (PSSM) capabilities, aligned around our portfolio priorities. Therefore, the company has made the difficult decision to propose a discontinuation of our PSSM operations at Sandwich, Kent, impacting approximately 500 roles. Under the proposals, other functions at our Sandwich site will continue with a different size.
Bond prices rise as UK gilt yields at June low
Bond prices jumped on Tuesday, pushing down the yield, or interest rate, on US 10-year Treasuries by around 20 basis points to 4.4%. This is down from 4.6%.
Meanwhile, the yield on 10-year UK gilts has fallen to 4.18% to its lowest level since June.
Black Friday: Best and worst places to buy tech and home appliances
People walk past Black Friday signage in a shop window during Black Friday on Regent Street in London, Britain, November 25, 2022. REUTERS/Henry Nicholls For many shoppers, Black Friday kicks off the zenith of the festive shopping season. But knowing where to shop can get you better value for money.
Consumer group Which? conducted a survey to find out the best and worst places to shop for tech and home appliances on Black Friday, which falls on 24 November this year.
With Black Friday and Christmas fast approaching, shoppers may be looking to get a speedy new laptop or shiny kitchen appliance — but we’ve found some retailers simply aren’t up to scratch when it comes to quality or customer service,” Ele Clark, Which? retail editor, said.
“Our research shows that shoppers wanting help with big purchases are best off sticking to specialist retailers, where customer care and technical expertise are a priority.”
Get all the details here
Money markets betting on rate cuts
Money markets have priced in half a percentage point of interest rate cuts by July next year.
Traders are now predicting their will be at least 50 basis points of cuts by next summer, which would take rates from the present range of 5.25% to 5.5% down to 4.75% to 5%.
There is also a 0% chance of an interest rate increase priced in when the Federal Reserve’s Federal Open Market Committee meets next month.
Pound rises on US inflation data
The pound (GBPUSD=X) has jumped to a two-month high after US inflation fell more sharply than expected last month.
The annual rate of inflation measured by the Consumer Price Index (CPI) – which tracks the cost of a basket of goods and services – slowed to 3.2%.
Sterling is up by 1.7 cents, more than 1.4%, to $1.2454, its highest level since September.
US inflation: Fed unlikely to raise interest rates
Markets expect Federal Reserve chairman Jerome Powell and his fellow US policymakers will begin cutting interest rates early next year Richard Flynn, managing director at Charles Schwab UK, said:
Today’s figures show that the rate of inflation has fallen compared to last month, making the prospect of a soft landing ever more likely. The numbers revealed today indicate the Fed is inching closer to its 2% CPI target.
The drop in inflation suggests that recent monetary policy has been doing its job. This good news reinforces the likelihood that the Central Bankers will hold off from further rate hikes in this cycle, which is the direction they seem to be leaning in any case. With wage growth slowing and sectors such as manufacturing losing pace, there is a risk that further tightening could trigger a problem in the economy.
Higher rates in the US would also make it more expensive to borrow in US dollars, creating difficulties for emerging-market economies that do so. All in all, “higher for longer” looks like a much more sensible move than “even higher”.
BREAKING: US inflation falls to 3.2%
US inflation has fallen by more than expected, as price pressures continue to ease across the country.
The consumer prices index rose by 3.2% in the year to October, below the 3.3% forecast, and down from the 3.7% in September.
Core inflation, which strips out food and energy, fell to 4.0%, its lowest since September 2021.
Energy prices fell by 4.5% over the last year, while food inflation was 3.3%.
Insolvencies up 18% in October
The number of companies falling into insolvency in England and Wales has jumped, new data has shown.
There were 2,315 registered company insolvencies in October, 18% higher than the previous year. It is also an 18% increase on a monthly basis, as there were 1,969 insolvencies in September.
The increase in company insolvencies was driven mostly by Creditors’ Voluntary Liquidations (CVLs) in which company directors opt to wind up an insolvent company which has no prospect of recovery.
David Hudson, restructuring advisory partner at business advisory firm FRP, said:
“Inflated input costs and higher interest rates have pushed many firms over the edge in recent weeks. However, this data is the result of pressure built up in businesses over months and years, so the likelihood is that we haven’t seen the true extent of this wave of insolvencies yet.
ISA: Call to restore real value of allowance and scrap LISA cap
ISA British Chancellor of the Exchequer Jeremy Hunt gestures as he speaks at Britain’s Conservative Party’s annual conference in Manchester, Britain, October 2, 2023. REUTERS/Hannah McKay Existing ISA rules could be relaxed from April next year to bring better rates for UK savers but campaigners are calling on the chancellor to bring back the “real value” of the ISA allowance, my colleague Pedro Gonçalves writes…
Chancellor Jeremy Hunt is said to be considering reforming the ISA system to encourage providers to offer more competitive rates and help consumers make more in tax-free interest.
However, the chancellor is not expected to increase the £20,000 annual allowance or make changes to the lifetime ISA (LISA). Campaigners have been calling for the exit penalty to be scrapped, and for the £450,000 property limit to be increased.
According to the Telegraph, Hunt plans to announce a consultation on relaxing ISA rules.
Read more here
Watch: How does inflation affect interest rates?
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