A decent start to the year for the FTSE 100 continued on Wednesday, though the morning was not without its fair share of warnings on inflation and strikes, which threaten to stymie the UK economy this year.
Food price inflation remains in double-digit territory, according to the British Retail Consortium. In its latest tracker, meanwhile, Kantar said grocery price inflation cooled, but stayed in robust territory.
Also in focus on Wednesday are a slew of PMI readings, as well as the minutes from the US Federal Reserve’s most recent meeting.
‘The minutes of the US Federal Reserve’s December monetary policy meeting will be released this evening. The December update seemed to be generally viewed by markets as more hawkish than expected on the interest rate outlook. In particular, Fed Chair Powell warned against expectations that interest rates may be cut later this year. Markets will be looking for more detail from the minutes particularly as the holiday period has meant that so far there has been less follow-up comment than usual from Fed policymakers,’ analysts at Lloyds Bank commented.
The FTSE 100 index opened up 10.22 points, or 0.1%, at 7,564.31. The FTSE 250 was up 105.41 points, or 0.6% at 19,239.75, and the AIM All-Share was up 1.13 points, or 0.1%, at 839.76.
The Cboe UK 100 was up 0.1% at 756.89, the Cboe UK 250 was up 0.8% at 16,714.80, and the Cboe Small Companies was up 0.2% at 13,264.93.
The new general secretary of the UK Trade Union Congress has called for an urgent meeting with the prime minister in a bid to break the deadlocked industrial disputes sweeping across the country.
Paul Nowak called for a change in government direction, saying ministers should open pay negotiations with unions.
It comes as rail workers continue a 48 hour strike, with more stoppages planned this month in the transport industry, NHS and civil service.
‘We can’t solve these problems without a fair deal for the people on the frontline. Every month experienced employees are quitting, with one in three public service staff now taking steps to leave their professions or actively considering it. This is simply unsustainable,’ Nowak wrote.
The pound was quoted at $1.2083 at early on Wednesday in London, sharply higher compared to $1.1980 at the London equities close on Tuesday. Sterling for now overlooked the threat of more strikes, as well as the peril of rampant inflation.
UK shop price inflation faded ever-so-slightly last month, as consumer brace for another ‘difficult year’.
According to the latest British Retail Consortium-NielsenIQ tracker, shop price annual inflation decelerated to 7.3% in December, from 7.4% in November. Food inflation, however, quickened to 13.3% in December, from 12.4% a month earlier.
‘2023 will be another difficult year for consumers and businesses as inflation shows no immediate signs of waning. Retailers will continue to work hard to support their customers and keep prices low. However, further high investment in prices may no longer be viable once the government’s energy bill support scheme for business expires in April,’ BRC Chief Executive Helen Dickinson commented.
Despite the gloomy outlook, UK retailers were higher during early morning trade in London. Tesco was up 1.4%, while Ocado was up 3.0%.
Data from Kantar showed that Ocado sales increased by 8.2% year-on-year in the 12 weeks to Christmas Day, as it maintained a market share of 1.7%.
Tesco sales, meanwhile, grew by 6.0%. It remained the UK’s most popular supermarket, though its market share slipped to 27.5% from 27.9%.
Aldi and Lidl grew in market share, meanwhile.
Elsewhere in the FTSE 100, RS Group was up 2.2% after it completed its $275 million acquisition of Mexican automation product distributor, Risoul.
RS originally announced the acquisition in August and said at the time that the deal would ‘significantly strengthen’ its position in Mexico.
Flutter Entertainment rose 1.3% as Sky News reported the firm has begun approaching candidates to become its next chair.
The gambling group operating brands such as Sky Bet and Paddy Power has hired search firm Russell Reynolds Associates to identify a successor to Gary McGann.
The company hopes to name a successor later in 2023, according to city sources, Sky News said.
McGann joined the board in November 2014, meaning he would no longer be deemed independent under the City corporate governance code by the end of this year.
BT rose 1.7% as Bloomberg reported that the telecommunications firm will take a stake in drone startup Altitude Angel.
BT will provide ‘network infrastructure and its scalability experience to deploy and maintain Altitude Angel’s ARROW tower network,’ Altitude Angel said on its website.
In European equities on Wednesday, the CAC 40 in Paris was up 1.0%, while the DAX 40 in Frankfurt was up 0.9%.
The euro stood at $1.0626 at early on Wednesday, higher against $1.0550 at the London equities close on Tuesday. Against the yen, the dollar was trading at JP¥129.93, lower compared to JP¥130.89.
In Asia on Wednesday, the Japanese Nikkei 225 index was closed 1.5% lower following disappointing data for the Japanese manufacturing sector.
Demand weakness further drove the downturn in Japan’s manufacturing sector in December, data from S&P Global showed.
The au Jibun Bank S&P Global manufacturing purchasing managers’ index fell to 48.9 in December, from 49.0 in November. This marked the second consecutive month of deterioration for the sector.
In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong ended 3.2% higher as investors remained optimistic about the relaxing of lockdown restrictions in the country.
The S&P/ASX 200 in Sydney closed up 1.6%, receiving a boost from a positive sentiment in China. Australia is a major trade partner with China.
The re-opening positivity persisted despite an ‘overwhelming majority’ of the EU’s 27 member countries wanting passengers coming from China to be systematically tested for Covid before departure.
The consensus recommendation emerged from a meeting of EU health ministry officials held Tuesday in Brussels. A crisis meeting to be held Wednesday on the issue will decide what coordinated measures will be applied across the bloc.
Travellers testing positive for Covid after arriving in the UK from China will not be forced to quarantine, however.
UK Transport Secretary Mark Harper said the move to test those coming into the country on flights from China is about ‘collecting information’ due to the Beijing government refusing to share its own coronavirus data.
In the US on Tuesday, Wall Street ended lower, following poor US manufacturing data. The Dow Jones Industrial Average ending just 10.88 points lower, the S&P 500 down 0.4% and the Nasdaq Composite down 0.8%
The S&P Global manufacturing purchasing managers’ index faded to 46.2 points in December from 47.7 in November, in line with the flash estimate.
‘The latest data signalled the fastest decline in operating conditions since May 2020, and was among the sharpest since 2009,’ S&P Global said. ‘The downturn stemmed from weak client demand which drove faster contractions in output and new orders. Muted domestic and foreign customer demand led to a slower rise in employment.’
Brent oil was quoted at $80.47 a barrel at early in London on Wednesday, down from $83.03 late Tuesday. Gold was quoted at $1,864.20 an ounce, significantly higher against $1,829.14.
Still to come on Wednesday’s economic calendar, there’s a US PMI print at 1500 GMT alongside job openings and labour turnover data.
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