The FTSE fell after Donald Trump clinched a victory in the Iowa caucuses. (ASSOCIATED PRESS)
The FTSE, European and US stocks fell on Tuesday, following a landslide victory for former president Donald Trump in the Iowa caucuses.
The FTSE 100 (^FTSE) was down 0.4% by the close of the session. Meanwhile, the DAX (^GDAXI) in Germany and the CAC (^FCHI) in Paris were down 0.3% and 0.3% respectively. The pan-European Stoxx 600 (^STOXX) was also 0.2% lower.
After a dramatic night, Trump entrenched his status as the frontrunner for the 2024 Republican presidential nomination, as Ron DeSantis edged out former UN ambassador Nikki Haley to take a distant second place.
In his victory speech the former president said he wanted to "straighten up the problems of the world."
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After the open in the US, the S&P 500 (^GSPC) was down 0.3%, the Dow (^DJI) fell 0.5% and the Nasdaq (^IXIC) declined 0.2%.
Meanwhile in the UK, labour market data showed that wage growth is cooling. The number of vacancies posted declined by 49,000 on the quarter, while the unemployment rate remained largely flat at 4.2%.
"With inflation currently on track to reach the 2% target as early as April, there is a significant possibility that we could see meaningful real pay growth throughout this year," said Jake Finney, economist at PwC UK.
Financial markets are currently expecting over 100 basis points of cuts to the Bank of England base rate over the course of 2024. The signs that the labour market is gradually normalising will reinforce the view that rate cuts could come as early as May, added Finney.
"It has been tough for many families recently, but with inflation now falling and the economy gradually returning to growth today’s continuing rise in real wages will offer further relief," said Chancellor Jeremy Hunt. "On top of this the cut in National Insurance contributions will get more people back into the jobs market, not just supporting economic growth but saving a typical two earner household around £1,000 this year.”
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Lucy Harley-McKeown
That's all from me today. Enjoy your evening!
Lucy Harley-McKeown
Dollar dollar
Axel Rudolph from IG has a take on the dollars day:
A hawkish reassessment of the Fed's monetary policy helped the US dollar index rise to a one-month high but was accompanied by a falling gold price. Global demand worries outshone concerns regarding a possible escalation in the Middle East and Red Sea conflicts with oil and gas prices slipping.
Lucy Harley-McKeown
Ocado's rocky year so far
Grocery and warehousing tech company Ocado is in the spotlight today as its shares whipsawed following a Q4 trading statement.
It showed a better-than-expected increase in retail revenue of 10.9% to £609.4m, up from a 7.3% increase in Q3, helped by a record Christmas trading performance, pushing the shares higher on the day.
Volumes also saw an increase of 4.8% with the average basket value rising 3.8% to £120.62. Full year revenues saw a 7% increase to £2.36bn, helping the business to return a positive full year EBITDA.
"For 2024 Ocado was cautious on its guidance, saying that revenue growth was likely to be impacted by lower growth in average selling prices, while making progress on improving efficiency to push EBITDA into mid-high single digits," said Michael Hewson of CMC Markets.
Lucy Harley-McKeown
FTSE 100 at one-month low
Here's Russ Mould with AJ Bell's take:
The FTSE 100 slipped to a one-month low, dragged down by healthcare and financial stocks. Part of the problem is central banks constantly teasing the prospect of rate cuts but then refusing to commit, which is causing unease among investors. There are plenty of signs that inflation is coming down and this is fuelling the rate cut expectations on the market, yet central banks are being spectacularly stubborn.
Rightmove was the biggest faller on the FTSE 100 after a rating downgrade from JPMorgan, sliding 4%. US group CoStar recently bought property portal OnTheMarket to enter the UK market and that has raised fears among investors and analysts that Rightmove’s dominance could finally be challenged. CoStar is a big player in the States and has the muscle to really upset Rightmove’s long-standing market position.
Lucy Harley-McKeown
Germany's ZEW data shows great expectations
An economic sentiment index in Germany beat expectations:
Hugo Boss stock plunged more than 10% on Tuesday, leading losses in the Stoxx 600, as it missed earnings targets for the year.
It's full-year sales were at record levels, climbing 15% to €4.2bn (£3.6bn). This failed to sweeten the deal for investors, however, as its preliminary pre-tax earnings of €121m missed consensus expectations of €129m.
The brand is one of many luxury retailers that have had to face up to challenging market conditions. UK-listed Burberry stock fell on Monday after its Christmas sales figures failed to wow.
Lucy Harley-McKeown
UK wage growth, the full story
Here's Yahoo Finance UK reporter Pedro Goncalves on today's wage data:
UK wage growth slowed in the three months to November, supporting the case for the Bank of England (BoE) to start cutting interest rates in the coming months.
Pay growth, excluding bonuses, fell sharply from 7.3% to 6.6% in the three months to November, according to figures from the Office for National Statistics (ONS). When bonuses were factored in, pay grew 6.5%.
Interest rate setters at the BoE will look closely at the new data, after worries that pay was rising too fast for inflation to fall to its 2% target.
Ben Broadbent, deputy governor of the BoE, said last month that “it will probably require a more protracted and clearer decline” in wage rises “before the Monetary Policy Committee can safely conclude that things are on a firmly downward trend”.
Threadneedle Street has raised interest rates in a bid to tackle inflation, holding them at a 15-year high of 5.25% in recent months.
Stocks dragging the FTSE 100 down this morning include:
Rightmove, down 4.6%
AstraZeneca, down 2.4%
Rolls Royce, down 1.9%
On the up:
Ocado, up 5.4%
Experian, up 2.4%
Burberry, up 1.7%
Lucy Harley-McKeown
Rate cut? Don't jump the gun...
Despite the fact the market is clearly pricing in rate cuts, at least in Europe, for the year ahead, Neil Wilson from Finalto has an eye on the fact that policymakers are pushing back. He says:
Several monetary policy hawks from the European Central Bank circled, delivered a clear message in concert – this was no coincidence so the market is taking it seriously. Nagel said "It's too early to talk about cuts, inflation is too high,” whilst Holzmann told CNBC: “I cannot imagine that we’ll talk about cuts yet, because we should not talk about it. Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year.” [emphasis my own].
I think this really goes to the point that I’ve been making for a while now – the market is pricing way too many cuts; CBs are going to look at lumpy, non-linear disinflation and not feel completely assured that they are in a position to cut. Labour market tightness provides the cover to stay higher for longer.
Lucy Harley-McKeown
Overnight in the US and Asia
Stocks in Asia were largely in a sour mood on Tuesday, with selling plaguing the Nikkei (^N225) in Japan and Hang Seng (^HSI) in Hong Kong. They lost 0.8% and 1.9% in the session respectively.
The Hang Seng was dragged down by its property gauge, which hit record lows. At the close the index was at a 14-month low, registering the biggest retreat in seven weeks.
Investors were also cautious ahead of key Chinese GDP data due out on Tuesday. Concerns had persisted through the end of 2023 that one of the world's key growth engines had stopped growing.
US markets were closed on Monday for MLK Jr day.
Lucy Harley-McKeown
Good morning!
Good morning from London! Labour market statistics that dropped this morning show the arctic wind sweeping across the UK isn't the only thing cooling on Tuesday. Without further ado, let's get to it.
Watch: Economy grew by 0.3% in November but recession remains a threat
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