LaToya Harding
·Business Reporter, Yahoo Finance UK
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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.
Wall Street followed their lead in New York this afternoon, with traders having their eyes on the Fed’s release of the “Beige Book” report to assess the state of the US economy.
It came as 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.
London’s benchmark index was 0.5% up as investors switched their focus to corporate earnings
Germany's DAX (^GDAXI) climbed 0.2% and the CAC (^FCHI) in Paris headed 0.9% into the green
The pan-European STOXX 600 (^STOXX) was up 0.2% by the end of the session.
Wall Street opened higher thanks to gains in megacap growth companies
UK rents are up by 9.2% in a record yearly rise
Rising fuel prices limits fall in UK inflation
Gatwick owner buys Edinburgh Airport for £1.3bn
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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."
Follow along for live updates throughout the day:
Live24 updates
LaToya Harding
Blog close and recap
Well that's all from us today, thanks for following along. Be sure to join us again tomorrow for more.
Here's a few of our top stories of the day:
UK inflation drops to 3.2% in March as Bank of England hints at rate cuts
Eurozone inflation eases to 2.4% raising hopes for interest rate cuts
UK rents are up by 9.2% in a record yearly rise
Multiple UK interest rate cuts less likely this year after inflation blow
Trending tickers: ASML, Asos, LVMH, JustEat
Have a good evening all!
LaToya Harding
Post Office boss cleared of misconduct claims
Post Office boss Nick Read has been cleared of misconduct allegations after an investigation on behalf of the organisation.
The Post Office said he has "the full and united backing of the board" to continue in his role, whilst a spokesperson said he also has the confidence of the government.
On Wednesday, the organisation said a report written by barrister Marianne Tutin, of Devereux Chambers, had "exonerated" Mr Read of "all misconduct allegations".
The Post Office has not released the document, and said it would be providing no further details about the allegations, which had been made as part of a whistleblowing process called "Speak Up".
LaToya Harding
UK no longer an inflation outlier
Prices in Britain are now rising slower here than in the US, where inflation rose to 3.5% in March, for the first time in two years.
Simon Pittaway, senior economist at the Resolution Foundation, said:
“Many economies have struggled through an inflation-driven cost of living crisis over the past two years, but the UK has been an outlier – experiencing a prolonged period double digit price rises. With UK inflation finally falling below the US, its unwanted outlier status is over.
“With a further significant drop due next month, inflation should soon return to target – and the pressure to cut interest rates will grow."
📉 At 3.2 per cent, inflation has fallen below US levels for the first time in two years.
Here's everything you need to know 🧵 pic.twitter.com/OPZ1MQzeQP
— Resolution Foundation (@resfoundation) April 17, 2024
LaToya Harding
Multiple UK interest rate cuts less likely this year
As inflation slowed less than expected, City investors have cut their forecasts for how much the Bank of England will cut interest rates this year. Traders are now pricing in just one interest rate cut in 2024, compared to expectations of five cuts.
The UK’s annual inflation rate fell in March for a second consecutive month, dropping to 3.2% – the lowest level since September 2021. Core measure, which strips out volatile elements such as energy, food, alcohol and tobacco, dropped from 4.5% in February to 4.2%.
However, both figures are higher than expected, with the market having looked for CPI of 3.1% in March and core inflation of 4.2%.
Ian Stewart, chief economist at Deloitte, said:
“Inflation is in retreat but the Bank of England cannot yet be sure that it is beaten. Headline inflation is likely to drop below 2% in the coming months, but to be confident it will stay there wage pressures need to ease.
“With earnings growing at close to 6%, and the economy reviving, the Bank will be in no hurry to cut interest rates.”
The BoE decided last month to leave UK interest rates on hold at their current 16-year high of 5.25% for a fifth consecutive time.
Meanwhile, both the European Central Bank (ECB) and the US Federal Reserve (Fed) have kept rates unchanged this month.
LaToya Harding
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.
LaToya Harding
Wall Street set to open higher
Wall Street is on track to open higher in New York in just over half an hour's time thanks to gains by megacap stocks.
The rebound comes after the benchmark S&P 500 and the Nasdaq closed lower on Tuesday amid rising Treasury yields.
It also follows comments from Federal Reserve chair Jerome Powell who said that “recent data have not given greater confidence in inflation,” suggesting a push back in the timing of interest rate cuts.
Traders will have their eyes on the Fed’s release of the “Beige Book” report to assess the state of the US economy.
LaToya Harding
Global deal activity down by 20.2% in Q1
A total of 11,717 deals (including mergers & acquisitions, private equity, and venture financing deals) were announced globally during the first quarter of this year — a decline of 20.2% compared to the 14,687 deals during the same period last year.
According to GlobalData, the number of M&A deals declined by 14.4% during the period, while private equity and venture financing deals volume saw a year-on-year drop of 19.1% and 28.8%.
Deal volume also fell across all regions. North America, which continues to dominate globally in terms of deal volume, witnessed a decline of 24.3% during Q1.
Europe, Asia-Pacific, Middle East and Africa, and South and Central America too witnessed respective deals volume slide of 20.6%, 12.2%, 18.7%, and 39.8% during the quarter.
Aurojyoti Bose, lead analyst at GlobalData, said:
“The decline could be attributed to the prevailing dent in deal making sentiments amid the challenging and uncertain market conditions.
All regions witnessed decline in deals volume, as most of the key markets experienced subdued activity Q1 2024. All the deal types also registered decline during the quarter.”
LaToya Harding
Royal Mail owner shares jump 20%
Shares in Royal Mail’s parent company have surged as much as 20% in London after a takeover bid from Czech billionaire Daniel Křetínský.
According to the Financial Times, Křetínský, who currently owns a 27.5% stake in International Distributions Services (IDS.L), launched a bid to take control.
Kretinsky’s EP Group said it put forward an all-cash proposal on 9 April to buy the remaining shares it does not already own.
While the takeover proposal was rejected by the IDS board, it said it would continue to “engage constructively with the board as EP Group considers all its options”.
EP Group has until 15 May to make a bid or walk away under UK takeover rules.
LaToya Harding
Losses at Asos widen
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.
LaToya Harding
BoE must "do the right thing" and cut rates in summer
The Bank of England has been urged to cut interest rates this summer by the chief executive of one of the world’s largest independent financial advisory and asset management organisations.
DeVere Group’s Nigel Green said:
"We hope that, despite the last stretch to hitting the Bank of England’s 2% target being harder and slower, overly cautious officials will not see this as yet another reason to further delay rate cuts.
“They must begin to bring down the historically high rate of 5.25% from June onwards. No ifs, no buts.”
He added:
“Bailey and his team need to hold their nerve and be proactive. This summer is the time for the central bank to act decisively and promptly.
"The Bank of England mustn’t be tempted to delay rate cuts any longer. They must do the right thing and cut from June onwards.”
LaToya Harding
UK average house price marginally slips to £281,000
Meanwhile, across the UK, the average house price came in at £281,000, a fall of 0.2%. This was down from 1.3% in the 12 months to January, according to the Office for National Statistics (ONS).
In the 12 months to February, average house prices fell in England to £298,000 (a 1.1% decrease), were down in Wales to £211,000 (a 1.2% fall), but increased in Scotland to £188,000 (a 5.6% rise).
Average house prices increased by 1.4% to £178,000 in the year to the fourth quarter of 2023 in Northern Ireland.
LaToya Harding
UK rents rises hit record high
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.
LaToya Harding
Eurozone inflation: How are countries performing
The latest data on Wednesday also revealed that the lowest annual rates were registered in Lithuania at 0.4%, Finland (0.6%) and Denmark (0.8%).
The highest annual rates were recorded in Romania, which came in at 6.7%, Croatia at 4.9%, and Estonia and Austria both at 4.1%.
Among other EU's Big Four, the inflation rate was above the EU average for Spain (3.5%) and France (3.4%) while Germany (3.1%) reported the same level as the EU. Inflation in the UK was 4.2%.
When compared with December, annual inflation fell in 15 EU countries, remained stable in one and rose in 11 others.
LaToya Harding
ECB predicted to cut rates in June
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.
LaToya Harding
Eurozone inflation eases to 2.4%
Eurozone inflation slowed to 2.4% last month, reinforcing expectations that the European Central Bank (ECB) will cut interest rates in June.
According to Eurostat, the statistical office of the European Union, inflation in the 20 nations fell from 2.6% in February, in line with a preliminary estimate released earlier this month. It marked a four-month low.
Underlying price growth, which filters out volatile food and energy prices, dropped from 3.1% to 2.9%, despite services inflation holding steady at 4%.
During March, services saw the highest yearly increase at 4% compared to February. Following this was food, alcohol, and tobacco at a rate of 2.7%, down from 3.9% in the previous month.
Meanwhile, non-energy industrial goods rose by 1.1%, a decrease from 1.6% in February, and energy prices experienced a decrease of 1.8%, which was less steep than February's 3.7% drop.
Euro area annual #inflation at 2.4% in March 2024, down from 2.6% in February 2024 https://t.co/9jqBgGskMG pic.twitter.com/3GJl5SxzvH
— EU_Eurostat (@EU_Eurostat) April 17, 2024
LaToya Harding
Digital euro: the future of money
The European Central Bank (ECB) has confirmed remuneration ceiling for euro area government deposits and adjusts remuneration of other non-monetary policy deposits
Remuneration ceiling for euro area government overnight deposits remains unchanged at euro short-term rate (€STR) minus 20 basis points
Uniform remuneration rate for most non-monetary policy deposits held with the Eurosystem adopted at €STR minus 20 basis points
Small amount of non-monetary policy deposits not yet aligned to this uniform rate to be aligned
Legal provisions for the remuneration of non-monetary policy deposits combined in single legal act to improve transparency
LaToya Harding
Insurers impose 'tax on being poor' by monthly price hike
Consumer group Which? has called on the UK's financial regulator to clamp down on insurance companies hiking the price of monthly payments, referring to the levy as a "tax on being poor."
Which? asked 39 car insurers and 34 home insurers what annual percentage rates (APRs) were being applied to monthly payments and where there was more than one rate, what made the difference.
Some car owners are charged APRs of nearly 40% when paying for insurance monthly, while people who stump up the yearly sum get off lightly.
Home insurance is only slightly better, Which? found, with some companies imposing charges of almost 35% APR on monthly instalments.
Read the full article here
LaToya Harding
City cuts forecasts for interest rate cuts
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
LaToya Harding
Labour shadow chancellor hits out
Rachel Reeves, Labour’s shadow chancellor, said:
Conservative ministers will be hitting the airwaves today to tell the British people that they have never had it so good. However, after 14 years of economic failure under the Conservatives working people are worse off.
Prices are still high in the shops, monthly mortgage bills are going up and inflation is still higher than the Bank of England’s target. At the same time Rishi Sunak risks crashing the economy again with his Liz Truss-backed £46bn unfunded tax plan to abolish national insurance.
The truth is Rishi Sunak is too weak to fix the economy his party broke and too out of touch to deliver for working people. It’s time for change. Only Labour has a long-term plan to grow our economy, cut people’s bills and make working people better off.
LaToya Harding
The plan is working, says Hunt
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.
Watch: How does inflation affect interest rates?
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