LIVE: FTSE higher as UK wage growth piles pressure on Bank of England
A look at how the major markets are performing on Tuesday
European stocks and the FTSE 100 opened in the green on Tuesday as the latest UK wage growth figures delivered a blow to the Bank of England’s bid to bring down inflation.
It comes after the Office for National Statistics (ONS) said average weekly earnings, excluding bonuses, hit an annual rate of 7.3% during the three months to May — the highest level on record and higher than analysts had expected.
The FTSE 100 (^FTSE) opened up 0.05% at 7,277.55 points. The CAC 40 (^FCHI) in Paris rose 0.72% to 7,194.57 points, while in Germany, the DAX (^GDAXI) climbed 0.51% to 15,748.69 points.
US and Asia
In the US, Wall Street closed higher on Monday as traders anticipate key US inflation data out this week and second-quarter (Q2) earnings reports from JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C) and BlackRock (BLK).
The Dow Jones (^DJI) rose 0.62% to 33,944.40 points, the S&P 500 (^GSPC) gained 0.24% to 4,409.53 points, while the tech-heavy NASDAQ (^IXIC) climbed 0.18% to 13,685.48.
Read more: UK shoppers boost retail sales despite high prices
In Asia, the markets staged a recovery overnight as the markets continued to digest the news that China's factory-gate prices in June experienced the most significant decrease in seven-and-a-half years, while consumer inflation reached its lowest point since 2021.
Tokyo’s Nikkei 225 (^N225) closed up 0.04% to 32,203.57 points, while the Hang Seng (^HSI) in Hong Kong gained 1.18% to 18,698.19. In mainland China, the Shanghai Composite (000001.SS) also rose, by 0.48% to 3,219.28 points.
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Pound
The release of the UK wage growth data this morning sent the pound up to its strongest position against the US dollar since April 2022, as investors doubled down on bets in favour of higher Bank of England interest rates.
The pound to dollar exchange rate (GBPUSD=X) in early trade on Tuesday rose 0.28% to 1.28, meaning £1 will get you $1.28. Meanwhile the pound to euro exchange rate (GBPEUR=X) went up 0.10% to 1.16.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said: "Financial markets are now pricing in a peak in UK rates of around 6.35% in the first quarter of 2024, which would surely make the BoE the most hawkish major central bank in the world between now and then.
“We think that markets are slightly ahead of themselves, although we do expect another 50 basis point hike from the MPC in August, with a real risk that the base rate tops out above 6%.”
Oil prices
Meanwhile, oil prices extended gains on Tuesday as OPEC+ output cuts offset demand concerns among investors.
US crude oil, or West Texas Intermediate (CL=F), gained 0.47% to trade at $73.33 a barrel, while Brent crude (BZ=F) rose 0.36% to $77.97 a barrel.
Economic data
Investors will also be watching key data out this week, including US CPI data for June on Wednesday with prices set to rise 3.6%year-on-year and 0.2% month-on-month, from 4% and 0.1% respectively, from 5.3% and 0.4%.
The Bank of Canada will also have its rate decision on Wednesday, which is expected to rise 22bps.
Moreover, all eyes will be on Brent and WTI crude prices when US EIA crude oil inventories are released.
On Thursday, China's trade balance figures for June will be closely watched with exports expected to fall.
UK GDP figures for May will also come out on Thursday with growth expected to be flat.
Also on Thursday, US PPI (June) data will be released showing initial jobless claims, which is also expected to fall.
Watch: Jeremy Hunt prioritises tackling inflation over tax cuts amid pressure from Tory MPs
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