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LIVE: FTSE down and Wall Street up as UK inflation to fall below 2% by spring
A look at how markets are performing this Wednesday
European stock markets were largely on the back foot on Wednesday despite news that UK inflation is predicted to fall to the Bank of England’s (BoE) 2% target this spring, in a welcome boost to mortgage holders.
In London, the FTSE 100 (^FTSE) ended 0.4% lower on the day, while the CAC (^FCHI) was 0.1% down in Paris, and the Frankfurt DAX (^GDAXI) was flat as bearish sentiment remains ahead of key macro data.
The STOXX 600 (^STOXX) slipped 0.2%, with healthcare and utility shares the worst performers so far.
Across the pond, the S&P 500 (^GSPC) rose 0.15% by the time of the European close, while the tech-heavy Nasdaq (^IXIC) was 0.3% higher. The Dow Jones (^DJI) gained 0.1% in New York.
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According to Deutsche Bank, UK CPI inflation will average 2.5% year-on-year in 2024, down from a previous forecast of 2.7%. Headline inflation will drop “a little below 2% in April and May”, before hovering around 2-2.5% for the remainder of the year.
Chief UK economist Sanjay Raja, said: "Core CPI, we think will slow to just under 4% y-o-y, with services inflation tracking just above 5% y-o-y. RPI, we think, will drop to 3.5% y-o-y on the year."
Meanwhile, the BoE governor has gave no further hints regarding the path of interest rates as he reaffirmed the need to bring inflation down. Andrew Bailey told MPs from the Treasury select committee on Wednesday that it is important for the UK to return to 2%.
Read more: No hint on interest rate cuts as Bailey says BoE committed to inflation target
Elsewhere, the price of Bitcoin (BTC-USD) surged by $1,000 (£786) last night, before dropping moments later, following a fake tweet that the US Securities and Exchange Commission (SEC) had approved bitcoin exchange-traded funds.
Bitcoin saw some significant volatility after the SEC tweeted that it had given approval for a Bitcoin ETF, a decision on which is expected today, before subsequently claiming that it had been hacked and had done no such thing.
The post on X claimed: “The SEC grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges.”
Soon after the initial post appeared, SEC chair Gary Gensler, said on his personal account that the SEC’s account had been compromised and that “the SEC has not approved the listing and trading of spot bitcoin exchange-traded products”. Gensler called the post "unauthorized".
Read more: Trending tickers: Bitcoin | Greggs | Sainsbury’s | Tesla
X confirmed the SEC’s account was compromised and said it was because of an “unidentified individual” obtaining control over a phone number associated with the agency’s account through a third party.
The price of the world's largest cryptocurrency fell back to $45,500, losing $63bn in market value over just a matter of minutes.
Read more: Why tax cuts in 2024 might not leave you paying less
Michael Hewson, chief markets analyst of CMC Markets, said: "Since the end of last year and the strong gains leading up to the end of last month markets have exhibited none of the same enthusiasm to carry the momentum higher, with trading activity subdued and a relatively negative bias so far year to date.
"It’s hard to assign a singular reason for the lack of enthusiasm so far month to date apart from a great deal of uncertainty around the prospects for the global economy and the timeline for central bank rate cuts."
LIVE COVERAGE IS OVER15 updates
BrewDog is set to slash hourly pay rates for its new London hires despite increasing them across the rest of the UK.
In a letter to staff, the company's chief executive James Brown said all new workers would now be paid £11.44 per hour nationwide, equivalent to the national living wage.
However, it represents a cut of more than 4% compared to existing London staff, who are paid £11.95 per hour.
Bar staff outside London would see their pay go up by around 5%, while existing London staff would have their hourly pay frozen, a real-terms cut.
Brown told employees: “Even with [a] strong performance over Christmas, as a wider business there is no hiding from the fact that in 2023, we made a trading loss, and despite many efforts in the past 12 months to reduce our spending, we still need to find more ways to get this business back to profitability and the financial stability that is needed.
“Inevitably, this does mean making some hard decisions.”
UK inflation to fall below 2% in April and May
FILE PHOTO: A general view of the Bank of England in the City of London. REUTERS/Hollie Adams/File Photo (Reuters / Reuters) Economists at Deutsche Bank have said that UK inflation could fall to the Bank of England’s 2% target this spring.
In a research note, the lender predicted that UK CPI inflation will average 2.5% year-on-year in 2024, down from a previous forecast of 2.7%.
Headline inflation will drop “a little below 2% in April and May”, before hovering around 2-2.5% for the remainder of the year.
Chief UK economist Sanjay Raja, said: "Core CPI, we think will slow to just under 4% y-o-y, with services inflation tracking just above 5% y-o-y. RPI, we think, will drop to 3.5% y-o-y on the year."
Greggs shares surge amid expansion plans
A customer leaves the Greggs store in Piccadilly Circus, central London. (Aaron Chown, PA Images) Shares in Greggs surged over 7% as the high street bakery reported a 9.4% rise in like-for-like sales across its own-managed shops in the fourth quarter.
Greggs said it does not plan to hike prices over the year ahead, but is unlikely to be able to offer price cuts as rising wages keep costs under pressure.
The group said 2023 sales rose 19.6% to £1.81bn from £1.51bn the year before and with like-for-like sales growth of 13.7%.
Greggs revealed plans to open up to another 160 stores in the year ahead and cheered a strong end to 2023.
The group opened a record 220 new shops over 2023, with 33 closures and 42 relocations leaving it with 145 new sites on a net basis and taking its total estate to 2,473.
Greggs is set to open between 140 and 160 new shops on a net basis in 2024 as it looks to give customers more convenient access to its stores.
Dollar strengthens
Pile of new design US dollar bills as background. Top view point. 100 Dollars with a portrait of the President. (Oleg Polonskii) The US dollar is trading softer after closing the previous session with more than a quarter per cent gain against a basket of other major currencies.
This strengthening of the greenback comes as expectations fade of a speedy unwinding of the Fed’s monetary tightening.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“In the run-up to the end of 2023, after a surprisingly dovish Jerome Powell all but announced the end of the fight against inflation, the dollar weakened as investors priced in a first rate cut in March, with several more expected throughout 2024.”
“However, the resilience of the US economy and the defiant tone of some Federal Reserve officials, who refused to claim victory in the fight against inflation, meant that the optimism of mid-to-late December evolved into uncertainty in a dynamic that is dollar positive.”
“Against this background, tomorrow’s US CPI numbers will be crucial in determining the short- to medium-term dollar price action.”
“These inflation figures can either consolidate the view that it is too early to announce the end of monetary tightening or, should they read below expectations, revive risk appetite and cancel the dollar gains of the last two weeks.”
Cheapest supermarket of 2023 revealed
NUERNBERG, GERMANY - CIRCA JUNE 2022: Aldi Sued Storefront Sign (CHROMORANGE RM) Aldi has been crowned the cheapest supermarket of 2023, beating its rival Lidl, according to consumer group Which?
My colleague Pedro Gonçalves writes...
December’s results show a basket of 43 groceries was £74.83 at Aldi, narrowly cheaper than at Lidl where it cost £76.74.
Aldi was the cheapest supermarket for 11 months of the year, with Lidl beating the rival discounter for one month in October, the consumer group said.
Waitrose came in nearly £20 more expensive than Aldi last month at £94.94, and Which? found it was the most expensive supermarket each month of 2023.
The watchdog said the findings demonstrated that shoppers could make considerable savings depending on where they bought their groceries.
Which? retail editor Ele Clark said: “With food prices continuing to put immense pressure on household budgets, it’s no surprise to see many people turning to discounters like Aldi and Lidl.
Which? also compared the cost of a larger trolley of more than 100 items each month. Aldi and Lidl are never included in this comparison as they do not always stock some branded products.
Asda was the cheapest supermarket for a larger trolley for 11 months of the year, apart from in July when Morrisons came out top.
Watch: How does inflation affect interest rates?
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