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Wall Street dips as FTSE 100 closes in the red despite inflation ease

FTSE  NEW YORK, NEW YORK - JANUARY 17: Traders work on the floor of the New York Stock Exchange during morning trading on January 17, 2023 in New York City. Stocks opened low after a holiday weekend disrupting an upswing in early 2023 momentum. Goldman Sachs reported that its quarterly profit plunged 66% from a year earlier to $1.33 billion and Morgan Stanley also reported a more than $2 billion in profit for the fourth quarter, giving the company a 40 percent decline from the previous year.  (Photo by Michael M. Santiago/Getty Images)
Wall Street and the FTSE 100 were both in negative territory this Wednesday. Photo: Michael M. Santiago/Getty

The FTSE 100 and European stocks finished mixed this Wednesday as traders in the UK digested today's slowdown in inflation.

The FTSE 100 (^FTSE) lost 0.29% to close at 7,828 points, while the CAC 40 (^FCHI) in Paris gained 0.23% to 7,093 points. In Germany, the DAX (^GDAXI) advanced 0.11% to 15,203.

Across the pond, stocks were lower despite early gains following a bigger-than-expected drop in December retail sales that supported hopes of smaller interest rate hikes by the Federal Reserve.

The Dow Jones (^DJI) lost 0.75% to 33,657 points. The S&P 500 (^GSPC) slipped 0.45% to 3,973 points and the tech-heavy NASDAQ (^IXIC) retreated 0.26% to 11,066.

In London, Ocado (OCDO.L), which was the biggest faller last session managed to bounce back and was one of the top risers, with shares up 2.97%. Miners Glencore (GLEN.L) and Experian (EXPN.L) both advanced around 4% as commodities prices like copper soar.

Burberry Group (BRBY.L) shares were up by 3.01% following its latest mixed update.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Burberry’s shares had been climbing back towards pre-pandemic highs buoyed by expectations of higher demand due to China’s re-opening but this isn’t yet showing up in the figures, with sales growth overall disappointingly slowing to 1%.

Read more: Inflation eases slightly to 10.5% but cost of living crisis continues

"The Chinese market continues to be sideswiped by the pandemic, with store sales down 23%. Investors will need another big dose of patience before well-heeled Chinese shoppers snap back into boutiques and international stores.

"However, elsewhere festive sales surged particularly across Europe with double digit growth recorded. In particular, the acceleration of sales of leather ranges are an encouraging sign. Efforts to elevate the brand have been paying off, given that a luxe image is rewarded by improved loyalty among its wealthy customers, who are far more insulated from inflationary pressures."

Inflation, which measures the rate of price rises, fell to 10.5% in the year to December from 10.7% in November.

Daniel Casali, chief investment strategist at wealth management firm Evelyn Partners, said: ‘Another slowing in annual inflation – the second since October’s peak of 11.1% – will add to the newfound sense of optimism in the UK economy, triggered by last week’s surprisingly positive monthly GDP growth data.

"But these are fairly marginal decelerations in prices, inflation remains elevated and together with likely negative annual GDP growth in 2023 this remains a risk for both markets and households.

"The Bank of England will welcome softening inflation but for its rate-setters the receding of price pressures has some way to go before they take the foot off the rates pedal, and particularly if growth continues to surprise on the upside and if growing wage demands prove successful."

Read more: UK households face £65bn increase in debt costs as interest rates jump

Meanwhile, Brent crude (BZ=F) rose and was trading at around $87/barrel, amid the prospects of rising demand in China as the economy in the world’s biggest oil importer gradually bounces back.

In Asia, Tokyo’s Nikkei 225 (^N225) closed higher on Tuesday, jumping 2.50% to 26,791 points, while the Hang Seng (^HSI) in Hong Kong rose 032% to 21,645. The Shanghai Composite (000001.SS) finished flat at 3,224.

Watch: What does the December PPI mean for markets?