The FTSE 100 (^FTSE) and European stocks pushed higher on Wednesday after UK inflation fell to its lowest level in two and a half years as price pressures continue to ease.
The Office for National Statistics (ONS) revealed that the consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.
However, this came in higher than the 3.1% economists expected.
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London’s benchmark index was 0.6% up in afternoon trade as investors switched their focus to corporate earnings
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Germany’s DAX (^GDAXI) climbed 0.5% and the CAC (^FCHI) in Paris headed 1.3% into the green
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The pan-European STOXX 600 (^STOXX) was up 0.6%
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Wall Street is set to open higher as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green
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UK rents are up by 9.2% in a record yearly rise
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Rising fuel prices limits fall in UK inflation
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Gatwick owner buys Edinburgh Airport for £1.3bn
Read more: UK inflation drops to 3.2% in March as Bank of England hints at rate cuts
“UK inflation remained a little higher than hoped in March, reflecting the strength of the economy, particularly the consumer sector, which is in pretty good shape,” Neil Birrell, chief investment officer at Premier Miton Investors, said.
“Inevitably everyone will be wondering what this means for interest rate cuts. The answer is probably not much, as this is just a case of inflation not slowing as quickly as hoped.
“However, the data does mean it’s unlikely the Bank of England will move to the top of the starting grid when it comes to who cuts first; them, the Fed or the ECB.”
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Five ways to get help with childcare costs
No parent needs to be told that having children is unspeakably expensive.
Figures from the HL Savings & Resilience Barometer found that couples with kids spend almost £7,000 more every year than couples without.
Over the course of 18 years, it means they’ll spend around £125,500 more.
In the early years, covering childcare is perhaps the biggest challenge – either paying for care or working less to look after children, so we need all the help we can get.
Here are five things worth considering.
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Losses at Asos widen
Fashion retailer Asos seen on a Samsung Galaxy tablet (Louisa Ryder) Asos (ASC.L) shares rose 4% in London on Wednesday despite the company announcing widening losses as half-year sales plunge by nearly a fifth.
The group said underlying pre-tax losses came in at £120m for the six months to March against losses of £87.4m a year ago.
Like-for-like sales at the online retailer fell 18% on an adjusted basis in the first half and it confirmed it still expects sales to fall by up to 15% over the full year.
Nevertheless, underlying earnings in 2024-25 financial year are set to be “significantly” higher than the previous two years as it reduces costs and cuts stock levels.
Jose Antonio Ramos Calamonte, chief executive, said this financial year was “about taking the necessary action to get us to that path”.
“When we do the right clothing at the right price, consumers fly into it,” he said, highlighting strong sales of denim, skirts and animal prints this spring.
Asos also named former Sainsbury’s and Amazon executive Dave Murray as its new chief financial officer, saying that his e-commerce experience would help return the group to profitability.
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UK rents rises hit record high
Northfield, Birmingham, 4th February 2024 – Houses for rent and sale in Northfield, Birmingham, England as the UK Housing Market continues to fluctuate. Credit: Stop Press Media/Alamy Live News (Stop Press Media) The average cost of rent in the UK rose by 9.2% in the 12 months to February this year – the highest annual increase since records began in 2015.
The average private rent in Great Britain was £1,246 in March, which is £104 more than a year ago, according to the Office for National Statistics (ONS).
Kensington and Chelsea remain at the top of the most expensive postcodes to live in the country, with the average rent hitting £3,305 in March. Outside London, Bristol had the highest rents, at £1,748.
In Wales, tenants were paying an average of £727 in March, up 9% or £60 from a year earlier.
Scotland saw rent prices jump 10.5% – some £90 more – in the past 12 months to hit £947 in March.
For Northern Ireland, the data only goes up to January, when rents increased by 10.1%.
The North East has the lowest rent in the whole of the UK, with tenants paying on average £662.
UK households were paying more rent for detached properties (£1,446), with flats or maisonettes coming in as the cheapest option, at £1,912.
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ECB predicted to cut rates in June
Frankfurt, Germany. 11th Apr, 2024. European Central Bank (ECB) President Christine Lagarde attends a press conference at the ECB headquarters in Frankfurt, Germany, April 11 2024. The European Central Bank (ECB) on Thursday decided to leave key interest rates unchanged after its regular rate-setting meeting here. Credit: Zhang Fan/Xinhua/Alamy Live News (Xinhua, Xinhua) Inflation in the eurozone has fallen quickly from its peak at 11.5% in October 2022 to near the central bank’s 2% over the past year, raising hopes for interest rate cuts starting as early as June.
Money markets are now pricing in 75 basis points of rate cuts this year, which is less than forecasts two months ago of between four and five cuts.
Last week, ECB president Christine Lagarde said:
“If our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase our confidence that inflation is converging to our target in a sustained manner, then it would be appropriate to reduce the current level of monetary policy restriction.
She also maintained a neutral stance on rate cuts, deferring any decisions to June when “a lot more information” will be available. This was despite a “few members” being ready for a rate cut in April.
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City cuts forecasts for interest rate cuts
London, UK. 15 April 2024. Tulips in bloom in front of the Bank of England in the City of London. A report by Ben Bernanke, the former head of the US Federal Reserve, has criticised the Bank of England’s recent record of forecasting inflation and path of interest rates which were undermined by out-of-date methods, old software and a failure to communicate clearly with the public. Credit: Stephen Chung / Alamy Live News (Stephen Chung) Money markets have trimmed forecasts of how much the Bank of England will cut interest rates this year.
They are now only fully pricing in the first rate cut in November, which was previously expected by September.
BoE governor Andrew Bailey said on Tuesday that he saw “strong evidence” higher interest rates were working to tame the rate of price rises.
The central bank’s own forecast is for inflation to “briefly drop” to its 2% target in the spring before increasing slightly.
Bailey signalled that UK interest rates remain on course to fall in the coming months amid growing fears that stubborn inflation will force the US to delay rate cuts.
He said at the International Monetary Fund (IMF) spring meetings in Washington:
“Our judgement with interest rates is how much do we need to see now to be confident of the process?”
UK RATE FUTURES POINT TO ABOUT 34 BASIS POINTS OF BANK OF ENGLAND RATE CUTS BY DECEMBER COMPARED WITH 42 ON TUESDAY
— First Squawk (@FirstSquawk) April 17, 2024
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The plan is working, says Hunt
London, UK. 6th Mar, 2024. Chancellor of the Exchequer Jeremy Hunt poses in Downing Street. Notable measures in today’s Budget were a 2p cut in National Insurance contributions and the abolition of the non-dom tax status for foreign nationals. (Credit Image: © Tejas Sandhu/SOPA Images via ZUMA Press Wire) EDITORIAL USAGE ONLY! Not for Commercial USAGE! (ZUMA Press, ZUMA Press Inc) On the back of the latest inflation news, chancellor Jeremy Hunt said:
The plan is working: inflation is falling faster than expected, down from over 11% to 3.2%, the lowest level in nearly two and a half years, helping people’s money go further.
This welcome news comes on top of our cuts to national insurance, which save the average worker £900 a year, so people should start to feel the difference as well as see it in their pay cheques.
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Watch: How does inflation affect interest rates?
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