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FTSE rises despite warning of UK inflation heading to 5%

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LONDON, ENGLAND - NOVEMBER 04: A general view of the Bank of England on November 04, 2021 in London, England. The Bank announced today that the Monetary Policy Committee voted to leave the bank rate at the historic low of 0.1%. (Photo by Leon Neal/Getty Images)
BoE governor Andrew Bailey warned today that UK households are already starting to feel the impact of rising prices. Photo: Leon Neal/Getty Images

European stock markets pushed higher on Friday, despite the UK facing a cost of living squeeze as inflation heads to 5%.

In London, the FTSE 100 (^FTSE) rose 0.5% by noon trade, while the CAC (^FCHI) gained 0.7% in Paris and the German DAX (^GDAXI) was up 0.2%.

It comes after the Bank of England (BoE) predicted that inflation will peak at 5% early next year, the highest in a decade.

Under the Bank’s new forecasts, wages after tax will not keep pace with inflation over the next two years.

Real post-tax labour incomes are expected to fall by 1.25% in 2022, and slip another 0.75% in 2023, worse than previously expected. The ongoing energy crunch and supply chain disruption is driving up prices.

BoE governor Andrew Bailey warned today that UK households are already starting to feel the impact of rising prices.

Watch: What is inflation and why is it important?

Elsewhere, UK house prices hit a record high, according to lender Halifax. British house prices rose by 0.9% in October, the fourth monthly increase in a row. It takes the average house price on its index to over £270,000, with prices up 8.1% in the last year.

Across the pond, S&P 500 futures (ES=F) were 0.2% higher, Dow futures (YM=F) were likewise 0.2% up, and Nasdaq futures (NQ=F) were 0.1% ahead a few hours before the bell in New York.

On Wednesday, the S&P 500 and Nasdaq both chalked up new highs for a fifth straight day as investors took comfort from the Federal Reserve’s slow and steady approach when announcing the timeline for its taper program. However, the Dow dipped on the day.

Traders will be looking towards the US non-farm payrolls report later.

Read more: Merck set for windfall as COVID pill gets UK greenlight

“The last two payrolls’ reports have been somewhat of a let-down to those who thought that the impending roll-off in stimulus measures on the 6th September would herald a strong rebound in the US labour market,” Michael Hewson of CMC Markets said.

“That this hasn’t happened has prompted quite a bit of head-scratching, even as weekly jobless claims have continued to decline, not only on a weekly basis but also in terms of continuing claims, which are now at 2.1m, over 600k below the levels we were seeing in August.”

He added: “More to the point, continuing claims are only 400k above where they were pre-pandemic, when they were trending at 1.7m.”

Asian markets closed lower on Friday following the previous day's gains. In Japan, the Nikkei (^N225) fell 0.6% while the Hang Seng (^HSI) slumped 1.5% and the Shanghai Composite (000001.SS) was 1% lower.

Watch: What are SPACs?

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