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FTSE and Wall Street rise as UK inflation drops and US retail sales fall

How major markets are performing on Wednesday

FTSE A person wearing a backpack with the slogan
FTSE investors optimistic as inflation figures drop both in the US and the UK. Photo: Kevin Coombs/Reuters

The FTSE 100 (^FTSE) and European stocks pushed higher on Wednesday amid news that UK inflation dropped to a two-year low of 4.6% in the year to October and that US retail sales fell.

London's benchmark index climbed 0.6% on the day, boosted by a weaker pound, while the CAC 40 (^FCHI) in Paris gained 0.4%. In Germany, the DAX (^GDAXI) advanced 0.8% and the Stoxx 600 (STOXX) rose 0.4%.

The Office for National Statistics (ONS) revealed that the UK’s consumer prices index (CPI) index dropped in October from 6.7% the month before. It was the lowest rate of price increases in two years and the bigger-than-expected fall is set to provide some relief to UK households gripped by the cost of living crisis.

Core CPI, which strips out energy, food, alcohol and tobacco, rose by 5.7% in the 12 months to October, down from 6.1% in September.

The prime minister pledged at the start of the year to halve inflation to below 5.4% by the end of 2023. Inflation was at 10.7% in the three-month period between October and December 2022.

The pound (GBPUSD=X) tumbled against the dollar on the back of the news, down as much as third of a cent to $1.246, dropping from levels last seen in September.

It comes as traders are less concerned that the Bank of England will raise interest rates further to fight inflation.

Meanwhile, homebuilders are the largest gainers on the FTSE adding 2%, while the banks sector gained as much as 1.6%.

Precious metal miners added almost 2%, while industrial metal miners were up as much as 1.8%, as prices of most metals rose on a softer dollar and falling bond yields.

Read more: UK wages grow faster than inflation

The positive session follows strong gains in Asia and on Wall Street last night, where investors cheered the drop in US inflation to just 3.2% last month.

By the time of the European close, the Dow Jones (^DJI) advanced 0.2% and the S&P 500 (^GSPC) rose 0.2%. The tech-heavy NASDAQ (^IXIC) gained 0.3%.

US retail sales declined for the first time since March, down 0.1% in October compared to the previous month. However, the figure was better than the 0.3% fall economists expected.

The Commerce Department added that September’s retail sales figures were also revised upwards to show a 0.9% rise instead of the 0.7% first reported.

Live coverage is over
  • Latoya Harding

    Markets close and recap

    Well that's all we have time for today. Thanks again for following along. Be sure to join us again tomorrow for more.

    Here's a quick recap of the top stories from today...

    UK inflation falls to 4.6%

    UK rents jump as tenants feel the squeeze

    UK house prices fall in September

    European Commission cuts growth forecast for eurozone

    Bank of England to cut interest rates by May 2024

    Have a great evening!

  • Latoya Harding

    UK inflation drop fuels hopes for interest rate cut

    inflation A general view of the Bank of England in the City of London, Britain, September 25, 2023. REUTERS/Hollie Adams
    inflation A general view of the Bank of England in the City of London, Britain, September 25, 2023. REUTERS/Hollie Adams

    Investors are betting the Bank of England will start cutting interest rates as early as May 2024 as UK inflation dropped to a two year low of 4.6% in October.

    Markets are now pricing in a fall in the interest rate in the middle of next year, possibly as soon as spring, coming down to 4.75% by the end of summer.

    Bruna Skarica, UK economist at Morgan Stanley, said in a note to clients: "As we had expected, October brought another leg lower in core goods inflation, as used cars prices collapsed. But services inflation – and all the core metrics we track – were soft as well.

    "The economy is weak, and firms’ pricing is waning. On top of all this came sizeable base effects from energy. The UK no longer looks like such a major outlier when it comes to inflation. We see the print as supportive of our call of BoE cuts next year, from May."

    The latest inflation data is below the Bank of England’s prediction that inflation would fall to 4.8% in October.

    Read the full article here

  • Latoya Harding

    Food price increases – overall 10.1%

    Bread and cereals – 12.2%

    Meat – 9%

    Fish – 5.5%

    Eggs – 17.1%

    Low-fat milk – (-1.8)

    Oils and fats – 10.9%

    Cheese and curd – 9.7%

    Fruit – 5.6%

    Pizza and quiche – 5.1%

    Vegetables – 10.8%

    Jams, marmalades and honey – 5.1%

    Butter – (-6.1%)

    Non-alcoholic beverages – 9.9%

    Tea – 15.1%

    Coffee – 9.5%

    Mineral waters, soft drinks and juices – 9.1%

    Alcoholic beverages – 10%

    Spirits – 9.5%

    Wine – 9%

    Beer – 12%

  • Latoya Harding

    Wall Street rises as US retail sales fall

    US retail sales have fallen for the first time since March, down 0.1% in October compared to the previous month.

    However, the figure was better than the 0.3% fall economists expected.


    The Commerce Department added that September’s retail sales figures were also revised upwards to show a 0.9% rise instead of the 0.7% first reported.

    Wall Street stocks opened higher despite the fall in retail sales.

  • Latoya Harding

    Gas prices fall

    Natural gas prices fell on Wednesday as record storage levels remain untouched amid mild weather.

    Dutch front-month futures, the benchmark European contract, slipped 1.2% to trade around €47 per megawatt hour.

    The UK equivalent contract dropped 1% to below 118p per therm.

    It comes as European gas prices have fallen 7.2% over the last month while UK contracts have fallen 6.1%.

  • Latoya Harding

    Wall Street poised to open higher

    US stocks are set to open in just over an hour in New York. Let's have a look at how things are shaping up...

    S&P 500 futures (ES=F) are up 0.4%, Dow futures (YM=F) have gained 0.3%, and Nasdaq futures (NQ=F) are 0.6% higher an hour before the opening bell in New York.

  • Latoya Harding

    Dollar weakens

    Ricardo Evangelista, senior analyst at ActivTrades, said:

    "The US dollar had its worst session in a year, with the index that measures its performance against a basket of other major currencies dropping more than 1.5% on Tuesday."

    "The sudden greenback weakness was triggered by the release of US inflation data for October, which was softer than expected and resulted in an increase in bets that the Fed’s hiking cycle is now truly finished."

    "Expectations of an earlier rate cut also increased, with about 50% of market participants believing it will happen before June. The impact on the markets was immediate. Investors anticipated the perspective of lower rates, buying treasuries and causing a drop in yields, in a dynamic that compounded the dollar’s weakness."

    "Against this background, the release of US PPI and retail sales numbers later today will be at the centre of investors’ attention. More disappointing data may induce further dollar softness."

  • Latoya Harding

    More on eurozone forecasts...

    The EC warned that the European economy has lost momentum this year, amid the cost of living squeeze, weak external demand and rising interest rates.

    Following a robust expansion throughout most of 2022, real GDP contracted towards year-end and barely grew in the first three quarters of 2023.

    Still high, though declining, inflation, and tightening monetary policy took a heavier toll than previously expected, alongside weak external demand.

    The latest business indicators and survey data for October point to subdued economic activity also in the fourth quarter of this year, amid increased uncertainty.

    Overall, the Autumn Forecast projects GDP growth in 2023 at 0.6% in both the EU and the euro area, 0.2 percentage points below the Commission’s summer forecast.

  • Latoya Harding

    European Commission cuts growth forecast for eurozone

    The European Commission has cut its growth forecast for the eurozone to 0.6% this year and 1.2% in 2024. It said “a high cost of living took a heavier toll than expected”.

    The revised growth forecasts were 0.2 percentage points lower for 2023 than the previous estimates, and 0.1 point lower for 2024.

    It comes as inflation is easing in Europe, currently standing at 2.9% in October.

  • Latoya Harding

    UK house prices fall in September

    Powys, Newtown, view over town centre to countryside beyond. house price
    Powys, Newtown, view over town centre to countryside beyond. house price

    And sticking with the property sector...

    The ONS also revealed that UK house prices fell year-on-year in September, for the first time in more than a decade.

    The average UK house price dropped 0.1% in the 12 months to September, to £291,385.

    This is down from £292,882 in August, and the first annual drop in house prices on the ONS’s data since April 2012.

    Average house prices over the 12 months to September 2023 decreased in England to £310,000 (negative 0.5%), decreased in Wales to £215,000 (negative 2.7%), but increased in Scotland to £195,000 (2.5%).

    Average house prices increased by 2.1% to £180,000 in the year to Quarter 3 (July to Sept) 2023 in Northern Ireland.

    A chart showing UK house prices
    A chart showing UK house prices

Watch: UK inflation drops sharply as PM says pledge has been ‘delivered’

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