LONDON MARKET MIDDAY: Stocks fall but pound up before US data

Tue, 13th Feb 2024 12:06

(Alliance News) - Stock prices in London were on the decline on Tuesday afternoon, with sentiment tetchy ahead of a US inflation report later.

The pound traded higher, meanwhile, on robust labour market data which may encourage some to rethink their dovish Bank of England expectations.

The FTSE 100 index traded 20.66 points lower, 0.3%, at 7,553.03. The FTSE 250 was down 117.64 points, 0.6%, at 19,086.29, though the AIM All-Share edged down 0.14 of a point to 750.04.

The Cboe UK 100 fell 0.3% to 755.04, the Cboe UK 250 dropped 0.6% to 16,516.30, and the Cboe Small Companies was down 0.2% at 14,361.50.

The CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.5%.

Stocks in New York are called to open lower. The Dow Jones Industrial Average is called down 0.1%, the S&P 500 0.4% lower and the Nasdaq Composite down 0.7%.

"Markets remained in a holding pattern, awaiting the next wave of inflation, manufacturing and GDP data to see if it is possible to second guess when central banks might press the magic 'cut' button on interest rates," AJ Bell analyst Russ Mould commented.

"Stronger than expected labour data from the UK didn't help matters as it effectively gives the Bank of England another reason to keep rates steady and not rush to cut them."

The pound was quoted at USD1.2664 early Tuesday afternoon, up from USD1.2621, where it stood at the time of the London equities close on Monday.

According to the Office for National Statistics, the jobless rate faded to 3.8% in the three months to the end of December from 4.2% in the period from September to November.

Unemployment had been expected to ease slightly less, to 4.0%, according to FXStreet-cited market consensus.

Annual growth in regular earnings, so excluding bonuses, amounted to 6.2% in the three months to December. Including bonuses, earnings rose 5.8% on-year.

Pay growth was hotter than expected by both measures. Earnings including bonuses had been expected to rise by 5.6%, according to FXStreet, while excluding bonuses, a rise of 6.0% was forecast.

The next batch of UK unemployment data is scheduled for March 12, so before the BoE's next decision on March 21.

On Wednesday, the ONS reports UK inflation data for January. Annual consumer price inflation is expected to have picked up to 4.2% last month from 4.0% in December, according to FXStreet.

Analysts at Lloyds Bank commented: "Nevertheless, we expect inflation to resume its downtrend in February and to return to 2% by the spring. BoE policymakers, however, may want to see more evidence of a sustained fall in inflation to target before commencing with rate cuts."

The euro traded at USD1.0775 early Tuesday afternoon, largely flat against USD1.0769 late Monday. Versus the yen, the dollar bought JPY149.41, down slightly from JPY149.44.

The afternoon's main event will be the US inflation data at 1330 GMT. Annual consumer price growth is expected to have ebbed to 2.9% last month, according to FXStreet, from 3.4% in December.

Scope Markets analyst Joshua Mahony commented: "Coming off the back of a period that has seen the Federal Reserve consistently reigning in market expectations over the timing and scope of their 2024 rate cuts, today's expected slide in US CPI could be a short reprieve from that trend. With the 0.5% reading from last January dropping out of the annual metric, base effects should help provide the basis for a welcome decline in inflation today. However, the wider picture remains problematic, with the pathway back to 2% looking far from simple."

In London, property firms were among the worst large-cap performers following the red-hot UK data.

Property portal Rightmove fell 3.0%, while housebuilders Taylor Wimpey and Persimmon fell 2.1% and 1.7%.

Pharmaceutical firms traded higher, however, AstraZeneca rose 0.8% and GSK added 1.1%. Supporting the latter, Citi lifted the stock 'buy', its first positive rating on the shares in seven years.

Tui shares rose 1.7%. Tui's pretax loss narrowed to EUR103.1 million in the first quarter that ended December 31 from EUR272.6 million a year before, as revenue rose by 15% to a "record" EUR4.30 billion from EUR3.75 billion.

Underlying earnings before interest and tax were EUR6.0 million, swung from a EUR153.0 million Ebit loss a year before.

Edison analyst Russell Pointon commented: "Tui has unveiled its Q1 2024 results, showcasing a record-breaking performance.

"However, among the positive financial results, Tui's shareholders are poised to vote on the company's plans to delist from the London Stock Exchange, a move supported by the board but subject to shareholder approval at today's upcoming AGM. With market attention poised to quickly shift from Tui's results to its listing status, all eyes are on this pivotal moment in the company's trajectory."

Brent oil was quoted at USD82.55 a barrel midday Tuesday, rising from USD81.69 late Monday. Gold rose to USD2,027.59 an ounce from USD2,013.55.

By Eric Cunha, Alliance News news editor

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