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Markets rise as US inflation comes in higher than forecast

Lucy Harley-McKeown
Updated
ftse CHICAGO, ILLINOIS - FEBRUARY 13: Vegetables are offered for sale at a grocery store on February 13, 2024 in Chicago, Illinois. Grocery prices are up 0.4% from December and 1.2% over the last year, the slowest annual increase since June 2021. (Photo by Scott Olson/Getty Images)
Investors are digesting the US Consumer Price Index release, one of the most important data inputs for the Fed in deciding its next policy move. The FTSE was up on Tuesday. (Scott Olson via Getty Images)

US stocks followed European markets and the FTSE 100 into the green, as fresh data showed UK wage growth continues to cool, and the latest US inflation print showed consumer prices on the up.

  • The FTSE 100 (^FTSE) had risen 1.1% by the closing bell. Germany's DAX (^GDAXI) and the CAC (^FCHI) in Paris also rose 1.2% and 0.9% respectively, rallying into the end of the day.

  • The pan-European STOXX 600 (^STOXX) was also 1.1% higher.

  • The S&P 500 (^GSPC) rose 0.9% in early trade, with the Dow (^DJI) up 0.5% and the tech-heavy Nasdaq (^IXIC) 1.2% higher.

  • Investors are digesting the US Consumer Price Index release, one of the most important data inputs for the Fed in deciding its next policy move.

  • Headline inflation met expectations with a monthly gain of 0.4% in February, following a 0.3% rise the month before. But "core" CPI — which strips out food and energy prices — came in at a 0.4% rise on the month and 3.1% gain on the year, both higher than estimates.

  • The moves also come amid hope that fresh job market data from the Office for National Statistics (ONS) will be a signal to the Bank of England that the economy is moving further towards conditions that might merit an interest rate cut.

  • “Wage growth has been easing since the summer of last year though it remains robust so the Bank of England may want to see it slowing further if it is to push ahead with interest rate cuts later this year," said Alice Haine, personal finance analyst at Bestinvest.

  • "The Bank of England has a tricky decision to make. The general sense is that interest rates will remain higher for longer as the central bank waits for more concrete evidence that inflationary pressures are easing so for now Britain’s workers must continue to grapple with the cost of living squeeze."

Follow along for live updates:

LIVE COVERAGE IS OVER19 updates
  • Lucy Harley-McKeown

    That's all for the day

    Thanks for reading! Head over to our US site for more market moving news.

  • Lucy Harley-McKeown

    UK mortgage arrears rise 50% amid high interest rates

    The proportion of UK mortgages in arrears has risen to its highest level since 2016 as households continue to struggle with high interest rates.

    The value of outstanding mortgage balances with arrears increased by 9.2% between October and December from the previous quarter, to £20.3bn, and was 50.3% higher than a year earlier, according to Bank of England data.

    The figures, provided by around 340 regulated mortgage lenders, showed the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, rose on the quarter from 1.12% to 1.23%, which was the highest since 2016.

    Read more

  • Lucy Harley-McKeown

    FTSE fallers

    And here are the fallers:

  • Lucy Harley-McKeown

    Top stocks in the FTSE 100 before the close

    Here are the stocks propping up the index, which is currently trading 1.1% higher.

  • Lucy Harley-McKeown

    Oracle shares jump 11%

    Heres more from our Trending tickers report:

    Shares in Oracle jumped 11% as the software company reported quarterly earnings that exceeded Wall Street’s expectations.

    The rally in Oracle's shares added around $40bn to its stock market value.

    Excluding items, the company posted profit of $1.41 per share for the third quarter, up 16%. However, revenue of $13.28bn for the three months ended 29 February was below analysts' average estimate of $13.30bn.

    For the fiscal fourth quarter, Oracle said it expects earnings of $1.62 to $1.66 per share.

    Oracle CEO Safra Catz said the company was committed to hitting previously stated goals of $65bn in sales by fiscal 2026. “Some of these goals might prove to be too conservative given our momentum,” she said.

    Oracle also told analysts to expect a joint announcement with chip giant Nvidia (NVDA).

  • Lucy Harley-McKeown

    More detail on CPI

    Here's some more detail on the CPI print from Jeffrey Roach, chief economist for LPL Financial:

    • In addition to shelter and gas, consumer prices for airfares, vehicle insurance, and clothing rose in February. Consumers still have a strong appetite for travel and consumer discretionary companies benefited.

    • But not all prices rose last month. Personal care items and household furnishings were a bit less expensive.

    • All households appreciated the lower prices for many groceries last month.

    "The inflation experience is a bit like the concentration in the equity markets right now. Outside of shelter and gas prices, inflation would be benign," says Roach. "The long term disinflation trajectory has probably not changed but the path to the Fed’s 2% target will be choppy. Expect to see markets struggle with what this means for Fed policy. As of now, markets expect the first cut to be in June. Despite the stickiness of inflation, current Fed policy is clearly restrictive. See second graph below."

  • Lucy Harley-McKeown

    US CPI print

    Here are the numbers:

    Core (which strips out volatile factors) slightly was higher than expected.

  • Lucy Harley-McKeown

    Trending ticker: Boeing

    Here's Yahoo Finance UK's Pedro Goncalves on Boeing's premarket position:

    Boeing (BA) shares were in the red, after reports that prosecutors in the United States have opened a criminal investigation into the mid-flight blowout involving a Boeing 737 MAX operated by Alaska Airlines.

    The Department of Justice's (DOJ) investigation will delve into Boeing's recent production and manufacturing mishaps, which have also impacted the broader airline industry, from flight availability to crew employment and ticket prices, according to the Wall Street Journal.

    The investigation comes as Boeing is under scrutiny over its safety record following a series of incidents, including two fatal crashes involving the Boeing 737 MAX in 2018 and 2019.

    The DOJ probe will inform authorities’ assessment of whether Boeing has complied with the terms of a $2.5bn (£1.95bn) settlement to avoid prosecution in relation to those crashes.

  • Lucy Harley-McKeown

    Mortgage increases: Payments set to rise £1,800 when deals come to an end

    Fixed-rate mortgages are a popular product, and people are about to roll off those, says Miles.

    There are two speeds: Those about to head into higher rates, and those that have made money on their savings, which means things could even out.

  • Lucy Harley-McKeown

    What did the government get wrong?

    Miles puts underperformance compared with other economies down to a long-run underperformance of the UK that goes back to the financial crisis.

    Canada and the US are much less dependant on imported gas than the UK, adds Miles.

    The stock of debt across economies has gone up by a lot compared with GDP, and the UK is grappling with that more seriously now.

    On productivity growth: "If there was an easy answer to that, we might have done something about it."

    The unemployment rate is one bright spot in that the burden doesn't fall heavily on those that are unemployed.

  • Lucy Harley-McKeown

    Public finances: Sensitivity to interest rates could go £50bn either way

    Tom Josephs says public debt could be sensitive to interest rates to the tune of £50bn if the Bank of England moves 1% in either direction.

    Meanwhile living standards are on course to fall at a record rate during this parliament. The fall in living standards is down to a "combination of unfortunate events," says Professor David Miles.

    This includes the increase in import prices of things like oil and gas, and a rising share of tax coming out of GDP, flat growth, and a slow growth of productivity.

    "Some of that looking forward looks a bit more optimistic," he adds, as energy prices fall.

  • Lucy Harley-McKeown

    Happening now: Treasury committee hearing on the spring budget

    The Committee’s scrutiny is likely to focus on the spring budget’s impact on businesses and households across the UK, and on inflation, taxation and economic growth.

    We're hearing from:

    Richard Hughes, chair, Office for Budget Responsibility

    Tom Josephs, member of the Budget Responsibility Committee, Office for Budget Responsibility

    Professor David Miles CBE, member of the Budget Responsibility Committee, Office for Budget Responsibility

  • Lucy Harley-McKeown

    UK business confidence at two-year high

    A new survey released today by S&P Global shows that UK business confidence is the highest it's been in two years, with an uptick in expectations for profit, staff hiring and capex.

    The UK posted the strongest sentiment out of the 12 economies monitored by the survey. Ireland was the next-highest with a net balance of +43%, while Germany resided at the bottom of the rankings (+10%).

    "While growth projections improved, firms were slightly more cautious about the inflation outlook," said David Owen, senior economist at S&P Global Market Intelligence. "Wage pressures are forecast to remain incredibly sticky, and transport costs could pick up amid global supply chain challenges."

  • Lucy Harley-McKeown

    Persimmon gears up for challenging year

    Persimmon (PSN.L) is the top faller in the FTSE 100 (^FTSE) this morning, dragged down by its latest set of results.

    The headline figures from the housebuilder included:

    • It completed 9,922 homes last year, compared to 14,868 in 2022.

    • Underlying operating profit fell significantly to £354.5m compared to £1bn last year.

    "With little help from last week's budget the Group is relying on self-help to improve returns, but it needs significant volume growth to lift margins and returns," said Anthony Codling, managing director of equity research for European Housebuilding at RBC Capital Markets. "Persimmon has a strong landbank, but as ever the bottleneck for growth is planning. The shares are flat so far year to date and today's result statement does little to lift investors spirits in our view."

  • Lucy Harley-McKeown

    Chancellor on jobs

    Here's Jeremy Hunt's statement on the ONS jobs data:

    “Our plan is working. Even with inflation falling, real wages have risen for the seventh month in a row. And take home pay is set for another boost thanks to our cuts to National Insurance which in total are putting over £900 a year back into the average earner’s pocket.”

  • Lucy Harley-McKeown

    UK jobs data: Pay growth eases

    Just in from the Office for National Statistics:

    • Payrolled employees in the UK rose by 15,000 between December 2023 and January 2024, and rose by 386,000 between January 2023 and January 2024.

    • While the number of payrolled employees continues to increase, the rate of annual growth is decreasing.

    • The early estimate of payrolled employees for February 2024 increased by 20,000 (0.1%) on the month and increased by 368,000 (1.2%) on the year to 30.4 million.

    • Annual growth in total earnings (including bonuses) in Great Britain was 5.6% in November 2023 to January 2024, and annual growth in employees' average regular earnings (excluding bonuses) was 6.1%.

    • Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)) for total pay rose on the year by 1.4% in November 2023 to January 2024, and for regular pay rose on the year by 1.8%.

  • Lucy Harley-McKeown

    Monday trade in the US

    From the Yahoo Finance US team:

    US stocks closed mixed on Monday while bitcoin (BTC-USD) extended its record rally as investors counted down to crucial inflation data that will test bets on interest rate cuts.

    The Dow Jones Industrial Average (^DJI) rose 0.1%, while the S&P 500 (^GSPC) shed 0.1%. The Nasdaq Composite (^IXIC) fell about 0.4%, extending Friday's sharp decline in the tech heavy index.

    Now the market is bracing for a last big test before the Federal Reserve's March 20 policy meeting. The Consumer Price Index report on Tuesday is front of mind after chair Jerome Powell said the Fed wants to be more confident that inflation is cooling before easing up on borrowing costs. Given that, a surprise rise would undermine the optimism for a Fed policy shift that has boosted stocks.

    Equities faltered after February's jobs report, which showed hiring remains strong even as unemployment beat estimates — a mixed picture that added little certainty to the debate on rate cuts.

  • Lucy Harley-McKeown

    Overnight in Asia

    The Nikkei (^N225) fell slightly, weighed down by expectations of a policy shift to fiscal tightening from the country's central bank. Reuters reported last week that officials are coming round to the idea of ending negative rates, citing sources familiar.

    Hong Kong's Hang Seng (^HSI) charged 3.1% higher, lifted by Chinese tech firms and positive expectations for US inflation.

  • Lucy Harley-McKeown

    Good morning!

    Hello again from London, where FTSE 100 futures are suggesting markets are in a better mood than the gloomy weather. Later on we've got Bank of England mortgage data and a follow up to the spring budget in the form of a select committee.

    Let's get to it.

Watch: Bitcoin rally: Should investors buy into reinvigorated crypto hype?

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