Focus on Fed, ECB after inflation readings

(Alliance News) - The FTSE 100 in London closed higher on Thursday, as a key US inflation gauge ebbed year-on-year, though a monthly increase could keep a lid on Federal Reserve interest rate cut enthusiasm.

The FTSE 100 index inched up 5.04 points, 0.1%, at 7,630.02. The FTSE 250 rose 41.29 points, 0.2%, at 19,054.87, and the AIM All-Share ended down 1.54 points, 0.2%, at 736.50.

The Cboe UK 100 ended up 0.3% at 766.13, the Cboe UK 250 rose 0.6% at 16,470.97, and the Cboe Small Companies edged up slightly to 14,462.39.

In European equities on Thursday, the CAC 40 in Paris fell 0.3%, though the DAX 40 in Frankfurt rose 0.4%.

In New York, the Dow Jones Industrial Average was down 0.3%, the S&P 500 fell 0.1%, while the Nasdaq Composite was flat.

According to the Bureau of Economic Analysis, the core personal consumption expenditure grew 2.8% on-year in January, easing from December's 2.9% rise. The core PCE reading is the Fed's preferred inflation gauge.

The outcome came out in line with FXStreet cited consensus.

The core data excludes food and energy. The annual headline PCE index, which does not, grew 2.4% in January, ebbing from a 2.6% a month earlier. The figure was also in line with consensus.

On a monthly basis, personal consumption expenditures rose 0.3% in January. They had rose by 0.2% in December from November. Core personal consumption expenditures rose 0.4% in January from December. In December, they had risen 0.2% on-month.

"Not only does this mark the largest jump in a year, but it is also in line with an annualised inflation rate of around 5%," Ebury analyst Matthew Ryan commented.

Atlanta Federal Reserve President Raphael Bostic suggested a summer rate cut may be appropriate. He said it is too soon to declare victory over inflation, however. He warned of a bumpy path as inflation declines.

The pound was quoted at USD1.2636 late Thursday in London, lower compared to USD1.2656 at the equities close on Wednesday. The euro stood at USD1.0811, down against USD1.0835. Against the yen, the dollar was trading at JPY149.82, lower compared to JPY150.73.

XTB analyst Kathleen Brooks commented: "The focus on the core PCE deflator is an interesting choice for the market, since it is less timely than the CPI and PPI reports, and we largely know what to expect in advance of its release. Due to this, we think that the market will quickly move on from this PCE data and focus on the next major macro events next week: the ECB meeting and the US non-farm payrolls report."

Eyes were also on the European Central Bank after a German inflation reading.

Consumer price inflation in Germany slowed by more than expected this month, provisional data from the Federal Statistics Office showed on Thursday.

The consumer price index rose by 2.5% annually in February, abating from 2.9% in January. That is the lowest level of inflation since June 2021, when it stood at 2.4%. FXStreet-cited market consensus had expected the rate of inflation to ease to 2.6%.

Analysts at ING commented: "At first glance, today's German inflation data brings some relief for the European Central Bank and could support calls for a rather early rate cut – especially given that economic sentiment in the eurozone remains bleak. However, underlying inflation illustrates just how difficult the last mile will be for the ECB and clearly argues against cutting rates too early. As a result, the ECB will want to wait to be entirely sure of what the trend of both headline and underlying inflation will be. Here, wage developments remain key and as long as the economy doesn't fall off a cliff, the ECB will sit tight, waiting for more data."

In London, Howden Joinery and Haleon ended the best FTSE 100 performers, rising 7.0% and 5.6%.

The London-based kitchen and joinery supplier said pretax profit dropped 19% in 2023 to GBP327.6 million from GBP405.8 million. It said that this included GBP17 million of additional costs relating to a 53rd week. Before these costs, pretax profit was down 15%.

Revenue fell 0.3% to GBP2.31 billion in 2023 from GBP2.32 billion a year earlier.

Davy analysts commented: "Comments on trading since the start of 2024 are reasonably encouraging, and Howdens expects market conditions will be 'broadly unchanged'. Howdens is a long-standing favourite of ours, and we are confident that the business will return to growth once the operating environment becomes less hostile."

On the back of the results, Howden upped its dividend by 1.9%, bringing the total dividend for the year to 21.0p, up from 20.6p.

Surrey, England-based consumer healthcare company Haleon said revenue for 2023 was up 4.1% to GBP11.30 billion from GBP10.86 billion in 2022, an 8.0% increase at an organic rate.

This was in spite of an adverse foreign exchange impact of GBP416 million, Haleon said, driven by the strengthening of the sterling against the Argentine peso, Chinese renminbi and other currencies.

Pretax profit was up 0.6% to GBP1.63 billion from GBP1.62 billion, while operating profit rose 9.4% to GBP2.00 billion from GBP1.83 billion.

Elsewhere, Hunting jumped 12%. The London-based maker of parts and technology systems for the oil and gas sector said it swung to a pretax profit of USD50.0 million in 2023 from a pretax loss of USD2.4 million in 2022, as revenue surged 28% to USD929.1 million from USD725.8 million.

Hunting highlighted that its order book increased by 19% to USD565.2 million at the end of 2023 from USD473.0 million a year before.

The firm proposed a final dividend of 5.0 US cents, up 11% from 4.5 cents. This brings its total dividend to 10.0 US cents, an 11% increase from 9.0 cents.

Looking ahead, Hunting said it is confident in its near and long-term outlook, adding that it expects its global outlook for energy in 2024 to be similar to that of 2023.

Wincanton jumped 23% as a bidding war for logistics provider appears to be in the offing.

It received a takeover offer from GXO Logistics.

Under the offer, Wincanton shareholders would receive 605p per share. The acquisition price values Wincanton at approximately GBP762 million on a fully diluted basis, and at around GBP764 million on an enterprise value basis.

On Monday, Wincanton accepted a revised, increased bid from CEVA Logistics. The new offer from CEVA, worth 480p per share, values Wincanton at GBP604.7 million on a fully diluted basis. CEVA is a subsidiary of CMA CGM, a shipping and logistics company based in Marseille, France.

CEVA said it is "considering its options".

Back among London's large-caps, International Consolidated Airlines Group fell 3.6%.

On Thursday, the Madrid-based airline operator which also owns Iberia, Vueling and Aer Lingus said pretax profit in 2023 multiplied to EUR3.06 billion from EUR415 million a year ago.

In the fourth quarter pretax profit leapt 77% to EUR441 million from EUR249 million.

"The market's lack of enthusiasm may reflect the slower return for business travel which is more important for the company than some of its rivals. It seems that while there has been some recovery in corporate travel, businesses are less likely to stomach the expense of regular air travel when video conferencing offers a much cheaper and quicker solution," AJ Bell analyst Russ Mould commented.

Brent oil was quoted at USD82.31 a barrel late in London on Thursday, up from USD81.78 late Wednesday. Gold was quoted at USD2,045.84 an ounce, lower against USD2,033.68.

The economic calendar on the first day of March has a slew of purchasing managers' index, including China and Japan overnight. Numbers for the eurozone are reported at 0900 GMT, the UK at 0930 GMT and the US at 1445 and 1500.

The local corporate calendar has annual results from education products publisher Pearson and property portal Rightmove.

By Eric Cunha, Alliance News news editor

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