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FTSE 100: European and US markets knocked as US inflation reading comes in hot

Lucy Harley-McKeown
Updated
Federal Reserve Chair Jerome Powell holds a press conference following the release of the Fed's interest rate policy decision at the Federal Reserve in Washington, U.S., January 31, 2024. REUTERS/Evelyn Hockstein/File Photo
All eyes are on Federal Reserve chair Jerome Powell as key inflation data for the US came in hotter than expected. (REUTERS / Reuters)

US stocks followed European markets and the FTSE 100 into the red on Tuesday after key inflation data for the US came in hotter than expected. The Consumer Price Index (CPI) is used as a guide by the Federal Reserve when it plots its interest rate path.

  • The FTSE 100 (^FTSE) was around 1% lower by the end of the day, while Germany's DAX (^GDAXI) fell 1% and the CAC (^FCHI) dipped 1% in Paris.

  • US stocks continued lower by the close in Europe: the S&P 500 (^GSPC) fell 1.1% while the Dow (^DJI) and the Nasdaq (^IXIC) were both 1.2% lower by late-morning.

  • The US CPI rose 0.3% over last month and 3.1% over the prior year in January, slightly higher than December's 0.2% month-over-month increase but a deceleration from December's 3.4% annual gain.

  • In the UK, there was also data that will inform the next moves made by the Bank of England. The Office for National Statistics said that the UK employment rate (75.0%) remains below estimates a year ago (October to December 2022), but has increased in the latest quarter. Open vacancies have fallen.

  • Meanwhile early estimates for January 2024 show median monthly pay increased by 6.4% compared with January 2023.

  • “The lingering concern for the Bank of England will be that the labour market has not cooled sufficiently to achieve a sustainable return to the 2% inflation target," said Jake Finney, economist at PwC UK. "This remains one of the key barriers to the base rate cut in May that markets are currently expecting."

Follow along for live updates:

LIVE COVERAGE IS OVER17 updates
  • Lucy Harley-McKeown

    Wrapping up

    That's all from me today, head over to the Yahoo Finance US site for more market moving stories.

  • Lucy Harley-McKeown

    Big dip for US stock futures

    All three major indices are down around 1% in premarket

  • Lucy Harley-McKeown

    US inflation in detail

    Our US team has the story:

    US consumer prices rose higher than expected in January, according to the latest data from the Bureau of Labor Statistics released Tuesday morning.

    The Consumer Price Index (CPI) rose 0.3% over last month and 3.1% over the prior year in January, slightly higher than December's 0.2% month-over-month increase but a deceleration from December's 3.4% annual gain.

    Both measures were slightly higher compared to economist forecasts of a 0.2% month-over-month increase and a 2.9% annual increase, according to data from Bloomberg.

    On a "core" basis, which strips out the more volatile costs of food and gas, prices in January climbed 0.4% over the prior month and 3.9% over last year.

    The monthly jump represented a slight acceleration from December's 0.3% increase and was the hottest monthly core reading since April. January's annual core increase matched December's.

    Read more.

  • Lucy Harley-McKeown

    US inflation comes in hotter than expected

    Core inflation numbers are out in the US. Here's Livesquawk with the details:

  • Lucy Harley-McKeown

    Body Shop UK administration process has been confirmed

    Here's the company's statement:

    "Today, the Directors of The Body Shop International Limited have appointed Tony Wright, Geoff Rowley, and Alastair Massey of business advisory firm FRP as Joint Administrators of the company, which operates The Body Shop’s UK business.

    Taking this approach provides the stability, flexibility and security to find the best means of securing the future of The Body Shop and revitalizing this iconic British brand. The Joint Administrators will now consider all options to find a way forward for the business and will update creditors and employees in due course.

    The Body Shop remains guided by its ambition to be a modern, dynamic beauty brand, relevant to customers and able to compete for the long term. Creating a more nimble and financially stable UK business, is an important step in achieving this.

    The Joint Administrators will continue to trade the business in administration, ensuring customers will be able to continue to shop in store and online for their favourite products.

    The Body Shop has faced an extended period of financial challenges under past owners, coinciding with a difficult trading environment for the wider retail sector. Having taken swift action in the last month, including closing down The Body Shop At Home and selling its business across most of Europe and in parts of Asia, focusing on the UK business is the next important step in The Body Shop’s restructuring."

  • Lucy Harley-McKeown

    Trending tickers: Bitcoin, ARM, Tui, Tripadvisor

    Here's what's caught our attention in markets today.

  • Lucy Harley-McKeown

    We need to talk about Bitcoin

    Bitcoin's price rose past the $50k mark on Monday, and maintained that level into the morning on Tuesday.

    It hasn't hit these levels since late 2021, with many inflows attributed to the recent approval of spot bitcoin ETF offerings and the anticipated Bitcoin halving event in April.

  • Lucy Harley-McKeown

    Germany's economic sentiment

    Germany's ZEW survey has come out at a higher clip than expected. It measures economic sentiment for the medium-term.

    The DAX is still down 0.6% on the day.

  • Lucy Harley-McKeown

    Tui swings to surprise profit

    The travel company stock is looking like this this morning:

    That's because it swung to a surprise profit and record revenues in its Christmas quarter. The company could also see a potential London exit in the coming months, as investors push for a single listing in Frankfurt and an exit from the FTSE 250.

  • Lucy Harley-McKeown

    Just in: FCA bans and fines Floris Jakobus Huisamen over London Capital & Finance plc financial promotions

    The City's premier regulator handed out a £31k fine for "recklessly signing off hundreds of financial promotions", which "contributed to thousands of investors being misled."

    In an update the FCA said that LCF marketed minibonds to retail investors. Financial promotions, signed off by Jakobus Huisamen, presented a misleading picture of the minibonds, making them appear a far more attractive investment than they were.

    "Investors were not given the full picture about the risks of the product, including the presence of hidden charges and the unsustainable nature of the lending being carried out by LCF," rhe FCA added.

  • Lucy Harley-McKeown

    FTSE remains lower

    The FTSE is still lower in mid-morning trade. Here are the stocks dragging the index down, courtesy of Hargreaves Lansdown:

    Top five fallers in the FTSE on Tuesday morning. Data: Hargreaves Lansdown
    Top five fallers in the FTSE on Tuesday morning. Data: Hargreaves Lansdown
  • Lucy Harley-McKeown

    UK wage growth slows but still beats inflation

    Here's the Yahoo Finance UK take on today's jobs news:

    UK pay growth has slowed to its lowest level for more than a year but it is still outpacing rising prices.

    Pay, excluding bonuses, grew by 6.2% in the last three months of 2023 compared with the same period a year before, according to the Office for National Statistics (ONS). After taking inflation into account, pay went up by 1.9%.

    Pay rises including bonuses was up by 5.8%. That was down from a summer peak of 8.5% but readings are higher than the City expected.

    The figures may be of concern to the Bank of England, that is be keeping a close eye on wage rises, having previously identified them as an inflationary concern. Inflation currently stands at 4%.

    Read more: UK wage growth slows but still beats inflation

  • Lucy Harley-McKeown

    Body Shop files stating intention to appoint administrators

    Small update from a story over the weekend, which was first reported by Sky News. The private equity-owned Body Shop has filed its intention to appoint administrators, with accounting firm FRP Advisory set to be appointed.

    Now we wait to see the extent of the damage to jobs.

  • Lucy Harley-McKeown

    Chancellor responds to labour market stats

    Here's Chancellor Jeremy Hunt on today's wage data:

    “It's good news that real wages are on the up for the sixth month in a row and unemployment remains low, but the job isn’t done. Our tax cuts are part of a plan to get people back to work so we can grow the economy - but we must stick with it.”

  • Lucy Harley-McKeown

    Overnight in the US

    It was a mixed day of trade across the pond on Monday, with the S&P 500 (^GSPC) snapping a week-long rally, but still trading above the symbolic level of 5,000. The Nasdaq (^IXIC) also finished the day 0.3% lower following a similar run of luck.

    The Dow (^DJI) bucked the trend, rising 0.3% to a record close off the back of a host of corporate earnings.

    Today, markets will look to the CPI print for guidance.

    Here's our US desk's take:

    The inflation report, set for release at 8:30 am ET, is expected to show headline inflation of 2.9%, a significant deceleration from December's 3.4% annual gain, according to estimates from Bloomberg.

    If those estimates hold true, it will be the lowest annual inflation rate in about three years and the first time that number will come in below 3% since March 2021.

    Over the prior month, consumer prices are expected to rise 0.2%, matching December's recently revised monthly increase.

    On a "core" basis, which strips out the more volatile costs of food and gas, prices in January are expected to have risen 3.7% over last year — a slowdown from the 3.9% annual increase seen in December, according to Bloomberg data.

    Monthly core prices are expected to have climbed 0.3%, unchanged from the prior month.

  • Lucy Harley-McKeown

    Overnight in Asia

    False alarm — nothing happened in Chinese markets on Tuesday because they are closed for the Lunar New Year.

    We hope you've been celebrating the year of the dragon too.

  • Lucy Harley-McKeown

    Good morning from London

    Lucy Harley-McKeown here, poised to bring you the latest in markets all over the world. The main upcoming concern for indexes will be the inflation print in the US later on (at 1.30pm UK time, 8.30am US time). We've already had wage growth data here in the UK this morning though, which will have pricked up the ears of central bank watchers. Without further ado, let's get to it.

Watch: Sunak insists UK economy has 'turned a corner'

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