Stock prices in Europe opened in the green on Tuesday, after data showed UK shop prices in August entered deflation for the first time since 2021, ahead of a key speech by Prime Minister Keir Starmer.
The FTSE 100 index opened up 48.39 points, or 0.6%, at 8,376.17. The FTSE 250 was up 31.41 points, or 0.2%, at 21,220.89, and the AIM All-Share was up 0.63 points, or 0.1%, at 778.32.
The Cboe UK 100 was up 0.6% at 838.08, the Cboe UK 250 was up 0.1% at 18,677.86, and the Cboe Small Companies was down 0.2% at 17,029.36.
During the first week of August, UK shop prices decreased 0.3% year-on-year, below the three-month average no change and compared with July’s annual inflation of 0.2%.
Non-food prices showed 1.5% deflation in August, compared with 0.9% deflation in July and leaving inflation ‘at its lowest rate since July 2021’.
Food prices remained in inflation, but this slowed to 2.0% from 2.3%. Inflation of fresh food prices eased to 1.0% in August from 1.4% in July, as supplier input costs decreased.
Meanwhile, in politics, Prime Minister Keir Starmer is set to give a speech in Downing Street on Tuesday, telling Britons that ‘things will get worse’ before they improve.
Starmer will promise to do the ‘hard work’ to ‘root out 14 years of rot’ under the Conservatives, PA reported. However, he is also expected to use his speech to warn that ‘frankly – things will get worse before we get better’ as the Labour administration tries to deal with ‘not just an economic black hole but a societal black hole’.
Chancellor Rachel Reeves is expected to raise taxes in her budget on October 30 after accusing the Tories of leaving a £22 billion shortfall in the public finances.
In European equities on Tuesday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.1%.
According to the Federal Statistical Office, Germany’s gross domestic product fell by 0.1% in the second quarter from the first quarter. The reading was unchanged from the estimate provided at the end of July.
GDP was unchanged from a year before, however. This represented an upward revision from a previously reported 0.1% annual decline, which also was the market expectation.
Meanwhile, separate data showed that German consumers are feeling more pessimistic heading into September, as concerns about jobs and wages add to a gloomy outlook for Europe’s largest economy.
The survey of around 2,000 people showed that consumer morale ‘suffered a severe setback’ compared to a month earlier, according to pollsters GfK and the Nuremberg Institute for Market Decisions.
The forward-looking indicator fell by 3.4 points to minus 22 points for September, they said in a statement.
The pound was quoted at $1.3202 early on Tuesday in London, down from $1.3220 at the equities close on Friday. The euro stood at $1.1167, down against $1.1193. Against the yen, the dollar was trading at JP¥144.74, down compared to JP¥144.80.
In the FTSE 100, Bunzl jumped 11%.
The firm reported pretax profit for the six months ended June 30 of £279.4 million, down from £317.1 million a year prior. Adjusted operating profit before income tax was £408.7 million, up from £395.6 million.
Revenue came to £5.71 billion, down from £5.91 billion the year previously. However, the firm raised its interim dividend to 20.1 pence from 18.2p year-on-year.
Looking ahead, Bunzl now expects adjusted operating profit in 2024 to show a ‘strong increase’ in comparison with 2023, mainly driven ‘by an increase in...group operating margin’.
Bunzl also announced a 3-year capital allocation commitment of around £700 million per year. Further, the company said it starts a share buyback programme of up to £250 million today, to be completed by March 3 at latest.
In the FTSE 250, Harbour Energy gained 6.7%.
It now expects to complete the acquisition of the Wintershall Dea asset portfolio in early September, compared to a previous timeline of early in the fourth quarter. This follows ‘considerable progress’ made on satisfying the conditions to completion, including the recent receipt of Mexico regulatory consents, the firm explained.
In Asia on Tuesday, the Nikkei 225 index in Tokyo was up 0.5%. In China, the Shanghai Composite was down 0.2%, while the Hang Seng index in Hong Kong was up 0.3%. The S&P/ASX 200 in Sydney closed down 0.2%.
US National Security Advisor Jake Sullivan arrived in Beijing Tuesday to meet top diplomat Wang Yi for tense talks, as China found itself embroiled in fresh security rows with key American allies Japan and the Philippines.
On Monday, US treaty ally Japan scrambled fighters after a Chinese military aircraft’s incursion into its airspace, which Tokyo called a ‘serious violation’ of its sovereignty.
And the Philippine defence chief on Tuesday accused Beijing of being the ‘biggest disruptor’ of peace in Southeast Asia following a week of confrontations between the two countries’ ships near a flashpoint disputed shoal in the South China Sea.
Ahead of Sullivan’s trip – the first by a US national security advisor to China since 2016 – an American official had said he would discuss the South China Sea with counterparts in Beijing, including foreign minister Wang. She did not indicate that the US expected breakthroughs on the trip.
‘We are committed to making the investments, strengthening our alliances, and taking the common steps on tech and national security that we need to take,’ the official said, referring to sweeping restrictions on US technology transfers to China imposed under President Joe Biden.
In the US on Friday, Wall Street ended predominantly lower, with the Dow Jones Industrial Average up 0.2%, but the S&P 500 down 0.3% and the Nasdaq Composite down 0.9%.
Gold was quoted at $2,513.00 an ounce early on Tuesday, lower than $2,515.73 on Friday.
Brent oil was trading at $81.36 a barrel early on Tuesday, higher than $78.88 late Friday.
Still to come on Tuesday’s economic calendar, there is a handful of data from the US, including consumer confidence data.
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