US stocks higher while FTSE reverses gains as US inflation eases
A look at how the major markets are performing on Wednesday
US stocks opened higher on Wednesday while European markets and the FTSE 100 reversed earlier gains as investors digested the latest inflation data from the US on how it could impact the Federal Reserve’s monetary policy path.
The US CPI inflation rate slowed to 4.9% in April, below the 5% analysts had expected.
In response, the Dow Jones (^DJI) rose 0.10% to 33,593.98 points, while the S&P 500 (^GSPC) climbed 0.31% to 4,132.10 points. The tech-heavy NASDAQ (^IXIC) also gained – by 0.68% to 12,258.74.
FTSE 100 and European stocks
Across the pond, the FTSE 100 (^FTSE) fell 0.29% to 7,742.35. The CAC 40 (^FCHI) in Paris dropped 0.41% to 7,366.83 points – and in Germany, the DAX (^GDAXI) was also down in afternoon trade, by 0.43% to 15,886.45.
Melrose Industries (MRO.L) and Compass Group (CPG.L) were trading at the top of the UK index, while Reckitt Benckiser Group (RBGLY) and RELX (REL.L) were at the bottom of the basket.
Traders were also keeping an eye on ASOS (ASC.L) stock, down nearly 9%, after the British online fashion retailer reported a deeper half-year loss and said it faced a challenging trading backdrop.
Its sales were down 8% and its revenue to February 28 dropped to £1.8bn ($2.28) from £2.0bn. The FTSE 250 company also posted a £290.9m pre-tax loss, compared to the £15.8m loss a year earlier.
TUI (TUI.L) shares also fell on Wednesday in the wake of its latest trading update.
In other company news, JD Wetherspoon (JDW.L) reported that profit would be at the top end of expectations with sales on course for a record year.
The pub chain, run by Tim Martin, posted a 12.2% increase in third-quarter (13-week period to 30th April 2023) like-for-like sales versus 2022 and a 9.1% jump versus pre-pandemic.
“Wetherspoons has been battling with a softening consumer and rising costs amid the backdrop of labour, energy and food inflation. These have been putting further pressure on the business after the pain of the pandemic when lockdowns meant pub chains were forced to close. To offset these headwinds, Wetherspoons has been focusing on streamlining its trading estate, with 21 pub disposals and a further 30 pubs on the market,” Scholar commented.
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Compass (CPG.L) was another share on the rise, up 2.3%, after the foodservice company reported half-year underlying operating profit of £1.05bn ($0.83bn) versus £744m year-on-year.
It also raised its forecasts for full-year profit, revenue, and margins. Plus it is returning cash to shareholders through a share buyback programme of up to £750m.
“The food catering business has benefitted from the restoration of economic normality post covid. Food services demand has sharply increased thanks to a revival in events as well as the return to offices and universities,” Scholar added.
In Asia, the major markets were lower overnight ahead of the US data release.
Tokyo’s Nikkei 225 (^N225) fell 0.41% to 29,122.18 points, while the Hang Seng (^HSI) in Hong Kong declined 0.57% to 19,753.66. In mainland China, the Shanghai Composite (000001.SS) was also in the red, down 1.45% to 3,309.04 points.
The pound (GBPUSD=X) further gained against the US dollar this afternoon to the highest point in a year, as US inflation data appears to put the Federal Reserve on a path to pausing its cycle of interest rate hikes, some analysts believe.
As a result, a pound now buys $1.26. Against the euro, the sterling (GBPEUR=X) also rose slightly, by 0.01% to 1.15.
In commodities, crude prices were trading lower again on Wednesday.
US crude oil, or West Texas Intermediate (CL=F), fell 0.88% to $73.06 (£57.84) a barrel, while Brent crude (BZ=F) declined 0.85% to $76.78 a barrel.
The price of gold (GC=F) was down 0.13% to $2,040.20 following the US inflation data release as investors realised it was not as bullish for the precious metal as had been expected.
Meanwhile, spot silver (SL=F) was little changed at $25.62 per ounce, platinum (PL=F) rose 0.3% to $1,107.94, and palladium (PA=F) gained 3.1% to $1,618.26.
US inflation was slightly weaker than forecast in April with consumer price inflation dipping to an annual rate of 4.9%, its lowest level since April 2021. Economists had expected it to remain steady at 5%.
“Annualised inflation coming in slightly below expectations at 4.9% compared to the 5.0% forecast might raise some hope that while this data does not spell out that Fed officials will be leaning towards providing guidance that the US central bank can begin communicating that lower interest rates are eventually returning, the economic release also does not imply that the Fed needs to raise interest rates higher either,” Jameel Ahmad, chief analyst at CompareBroker.io, commented.
Ahmad also said anyone hoping for this economic release to provide guidance on the future outlook of US interest rates will have had their hopes dashed.
“Similarly to the monthly employment report released at the end of last week, the inflation headline number coming in today allows the Fed to continue to bide its time and wait for clarity from future economic data releases over the coming months,” he added.
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Also high on the agenda this week will be a decision on interest rates by the Bank of England (BoE) at noon on Thursday.
It is expected to raise UK interest rates to the highest level since 2008 with another 25 basis point increase.
Other company news
In other company news, Uber (Uber) is launching flight bookings within its UK app.
The Financial Times says its unveiling a domestic and international flight booking tool which will launch in the coming weeks. It comes after Uber recently announced a new feature allowing customers to book Eurostar tickets.
“Uber is test driving flight booking in the UK, a key market for the ride hailing app outside the US borders. CEO Dara Khosrowshahi clearly has ambitious plans to shift Uber beyond just taxis and food delivery, with the goal of becoming a travel ‘super app’, servicing all travel needs for the consumer at competitive prices,” Victoria Scholar said.
She also noted how there are cross-selling opportunities whereby Uber could offer taxi or food delivery discounts to air travel or Eurostar customers, enticing users to remain within the app’s ecosystem.
“After last year’s tech sector sell-off which punished Uber, shares have been regaining ground since the summer trough last year with Uber up more than 60% in the past 12 months and up over 50% year-to-date,” she added.
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