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LIVE: FTSE, pound, and Wall Street surge as US inflation falls more than expected

How major markets are performing on Tuesday

ftse WASHINGTON, DC - NOVEMBER 08: Fed Chairman Jerome Powell delivers remarks during The Federal Reserve's Division of Research and Statistics Centennial Conference on November 08, 2023 in Washington, DC. Market watchers and policy makers are listening carefully to Powell for indications of whether the Fed would need to hike rates further to bring down inflation. (Photo by Chip Somodevilla/Getty Images)
Investers and policy makers are listening carefully to Federal Reserve chairman Jerome Powell for indications of whether the Fed would need to hike rates further to bring down inflation. The FTSE closed higher. Photo: Chip Somodevilla/Getty (Chip Somodevilla via Getty Images)

European stock markets reversed their early losses on Tuesday as UK wage growth cooled, vacancies fell, and traders digested US inflation data.

In London, the FTSE 100 (^FTSE) closed 0.2% higher, while the CAC (^FCHI) advanced 1.5% in Paris, and the Frankfurt DAX (^GDAXI) was 1.7% higher.

Across the pond, the S&P 500 (^GSPC) surged more than 2% by the time of the European close, and the tech-heavy Nasdaq (^IXIC) was 2.3% higher. The Dow Jones (^DJI) was 1.6% up in New York.

“Stock benchmarks registered modest gains on Tuesday, extending the sentiment seen in Asia overnight, with investors bracing for today’s crucial US inflation data.” Pierre Veyret, technical analyst at Activ Trades, said.

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“As previously said in our last report, market sentiment towards risky assets has lost a bit of its direction over the past few days after Federal Reserve officials expressed mixed hints about the future of monetary policies. With traders and investors worldwide not knowing what to believe, they will likely turn their focus back to data, making today’s inflation print crucial.”

“Simply put, if the cooling of rising price pressure is confirmed with today’s data, the prospect of a less aggressive stance from the Fed could become a reality, likely boosting appetite for stocks.”

It came as US inflation fell by more than expected, as price pressures continued to ease across the country.

The consumer prices index rose by 3.2% in the year to October, below the 3.3% forecast, and down from the 3.7% in September.

Core inflation, which strips out food and energy, fell to 4.0%, its lowest since September 2021. Energy prices fell by 4.5% over the last year, while food inflation was 3.3%.

The pound (GBPUSD=X) jumped to a two-month high on the back of the news.

Read more: UK wages grow faster than inflation

Meanwhile, workers in Britain are continuing to see their wage packets rise faster than inflation, thanks to strong pay growth and a drop in inflationary pressures.

According to the latest data from the Office for National Statistics (ONS), pay growth slowed slightly in the period from July to September, with regular pay (excluding bonuses) growing by 7.7%. This is down from 7.9% last month.

Total pay rose by 7.9%, down from 8.2%, bolstered by one-off bonus payments to civil service staff this summer. Wages lifted 1.42% after taking the current inflation level of 6.7% into account.

Read more: ISA: Call to restore real value of allowance and scrap LISA cap

The number of vacancies at UK firms also continued to tumble, its 16th consecutive period of decline as companies cut back on hiring.

In a sign that the economy was slowing, the estimated number of vacancies during the quarter to the end of October was 957,000, compared to 58,000 from May to July.

Vacancy levels fell in 16 of the 18 industry sectors, led by professional, scientific, and technical activities.

“Our labour market figures show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter," Darren Morgan, ONS director of economic statistics, said.

"The number of job vacancies fell for the 16th straight month. Nevertheless, vacancies still remain well above their pre-pandemic levels. With inflation easing in the latest quarter, real pay is now growing at its fastest rate for two years.”

Watch: How does inflation affect interest rates?

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