The weak start to the week for European stocks continues with the FTSE 100 down 0.1 per cent and shares in Paris barely in the green. The Dax is a little stronger but there’s a significant lack of momentum as we head towards the long weekend for most European nations. London is being dragged down by miners as higher commodity prices weigh on profits. It’s another busy day for trading updates and results with some big moves already, with Ocado up 4 per cent and Auto Trader Group down 5 per cent. More on all that here.
It was a similar scene in New York yesterday, with the S&P falling 0.3 per cent and the Dow 0.4 per cent. Futures show markets will open a little brighter later on today but still be flat for the week, following last week’s rate cut-infused rise.
Asian shares tell a different story, overnight Hong Kong, Japan and Shanghai all posted positive numbers, with the Hang Seng rising 1.3 per cent. The small rise in the Topix takes its yearly gain up to 17.5 per cent.
Some good news for UK consumers and businesses this morning as new data shows food inflation fell to 4.5 per cent in the four weeks to 17 March, down from 5.3 per cent. It’s now lower than it was before Russia’s invasion of Ukraine hit wheat and gas prices forcing up the cost of food inputs. The data, from the research firm Kantar rather than the Office for National Statistics, showed that prices of butter and milk, in particular, were falling, so maybe supermarkets will start taking security tags off packs of Lurpack. Worth remembering that falling inflation doesn’t mean food is about to get cheaper, although some products certainly are. Inflation is always sticky for consumers on the way up and on the way down, though. ONS data from last month showed food inflation fell to 5 per cent from 7 per cent.
Other good news from Bellway, particularly if you’re a shareholder, is that home sales are picking up as interest rates have fallen. This combined with the above does justify the Bank of England’s dovish stance last week. However, is it all strong enough to suggest that inflation will settle at 2 per cent? There’s still a lot to pass through the system and if anything this cements the view that all central banks, not just the BoE, will tolerate inflation over their 2 per cent targets for a lot longer, as my colleague Neil Wilson has often said. Higher for longer not just for interest rates, it seems.
Later on today, there are some consumer confidence figures coming out of the US but not much else to hang your hat on. Friday is the big one with the US personal consumption expenditure inflation, the Federal Reserve’s favoured measure, but worth remembering that trading will be limited as London and Frankfurt will be closed.
The Trader is written by Taha Lokhandwala
