UK inflation cooler than expected ahead of BoE

(Alliance News) - The FTSE 100 in London opened lower on Wednesday morning, with cooler-than-expected inflation doing little to shake off pre-US Federal rate nerves.

The FTSE 100 index opened down 7.59 points, 0.1%, at 7,730.71. The FTSE 250 was up 10.67 points, 0.1%, at 19,443.48, and the AIM All-Share was up 0.44 of a point, 0.1%, at 736.00.

The Cboe UK 100 was down 0.1% at 773.96, the Cboe UK 250 was down 0.1% at 16,858.53, and the Cboe Small Companies was down 0.1% at 14,798.49.

In European equities on Wednesday, the CAC 40 in Paris was down 0.9%, while the DAX 40 in Frankfurt was down 0.1%.

The consumer price index rose 3.4% in February from a year before, having increased 4.0% annually in January. This marks the lowest levels seen in two and a half years.

Inflation had been expected to decelerate to 3.6%, according to FXStreet-cited market consensus, meaning that the reading was below expectations.

The UK inflation rate hit a recent peak of 11.1% in October 2022. The Bank of England has a 2% inflation target, with the current rate still significantly higher than that.

The BoE will announce its next interest rate decision on Thursday. Markets are expecting to the bank to keep rates unchanged.

"After a brief blip, the UK is back on the disinflationary slide," said Nicholas Hyett, investment manager at Wealth Club.

"That, together with the news the economy fell into recession at the back end of last year, will make it easier for the Bank of England to consider rate cuts tomorrow - though we still think central bankers will ultimately choose to leave rates unchanged in March."

Before the BoE decides, there will be an interest rate decision from the US Federal Reserve.

The US Fed is expected to once again leave interest rates unmoved on Wednesday, while also dialling back cut expectations in its latest dot-plot.

The US central bank announces its latest interest rate decision at 1800 GMT on Wednesday. A press conference with Chair Jerome Powell follows shortly after. Threatening to hog the spotlight, the latest summary of economic projections will be revealed alongside the decision. The SEP features the dot-plot of interest rate expectations of policymakers.

In December, the chart suggested the Fed will enact three cuts this year.

On the eve of the interest rate decision, Wall Street ended higher, with the Dow Jones Industrial Average up 0.8%, the S&P 500 up 0.6% and the Nasdaq Composite up 0.4%.

The pound was quoted at USD1.2700 early on Wednesday in London, down compared to USD1.2719 at the equities close on Tuesday. The euro stood at USD1.0856, lower against USD1.0860. Against the yen, the dollar was trading at JPY151.50, higher compared to JPY150.76.

In the FTSE 100, insurer Prudential rose 0.7%.

On an IFRS basis, total insurance revenue in 2023 climbed 9.6% to USD9.37 billion from USD8.55 billion in 2022. Pru swung to a pretax profit attributable to shareholders' returns of USD2.10 billion from a loss of USD643 million.

"We delivered an excellent financial and operational performance in 2023 and deployed increased levels of capital in new business, enhancing core capabilities and expanding distribution. Sales growth has continued in the first two months of 2024," said Chief Executive Officer Anil Wadhwani, who joined Prudential in February 2023.

The best performer on the index in early trade was Halma, up 2.6%.

UBS raised the company's stock to 'buy' from 'neutral'.

In the FTSE 250 index, Johnson Matthey rose by 5.9%.

The company said it has agreed to sell its Medical Device Components business to Montagu Private Equity for USD700 million.

The MDC business produces components for medical device manufacturers globally with a focus on precious metal alloys and nitinol. It operates in the US, Mexico and Australia.

On the other hand, Computacenter lost 7.5%.

The Hatfield, England-based computer services firm reported that revenue in 2023 rose by 7.0% to GBP6.92 billion from GBP6.47 billion a year earlier. Pretax profit jumped 9.3% to GBP272.1 million from GBP249.0 million.

On the back of the results, Computacenter upped its dividend by 3.1% to 70.0p from 67.9p.

Looking ahead, the company said it expects to make further progress in 2024 with growth weighted to the second half of the year, reflecting "a significantly more challenging comparison" in the first half of the year than in the second half.

In China, the Shanghai Composite closed up 0.6%, while the Hang Seng index in Hong Kong was up 0.1% in late dealings.

China's central bank left key interest rates unchanged at its March meeting, as expected.

The People's Bank of China left the one-year loan prime rate - which serves as the benchmark for corporate loans - unchanged at 3.45%.

In Tokyo on Wednesday, financial markets in Japan closed for holiday. The S&P/ASX 200 in Sydney closed down 0.1%

Brent oil was quoted at USD86.95 a barrel early in London on Wednesday, down from USD87.91 late Tuesday.

Gold was quoted at USD2,157.33 an ounce, up against USD2,155.26.

As well as the Fed's interest rate decision, still to come on Wednesday's economic calendar there is a eurozone consumer confidence reading at 1500 GMT.

By Sophie Rose, Alliance News senior reporter

Comments and questions to [e-mail]

Copyright 2024 Alliance News Ltd. All Rights Reserved.