Stock prices in London continued to stay in the red at midday Tuesday as investors await an interest rate decision from the European Central Bank on Thursday, and the UK government’s upcoming budget due late this month.
The FTSE 100 index was down 45.57 points, or 0.6%, at 8,246.89. The FTSE 250 was down 12.40 points, or 0.1%, at 20,804.79, and the AIM All-Share was down 0.71 points, or 0.1%, at 733.06.
The Cboe UK 100 was down 0.4% at 826.05, the Cboe UK 250 was up 0.1% at 18,277.51, and the Cboe Small Companies was up 0.9% at 17,018.36.
Chancellor Rachel Reeves warned her budget on October 30 would be ‘tough’, as she gave the clearest signal yet that businesses will face a hike in national insurance.
At the government’s International Investment Summit, Reeves said: ‘We were really clear in our manifesto that we weren’t going to increase the key taxes paid by working people: income tax, national insurance and VAT and, on the business side of commitment, that we would cap corporation tax at its current rate of 25% which was the lowest in the in the G7 and we will stick to the commitments we made in our manifesto.’
Reflecting on Reeves’ options to plug the £22 billion ‘black hole’ in public finances, while still driving economic growth, AJ Bell’s Tom Selby warned that ‘the level of uncertainty created ahead of the budget has real-world consequences’.
Speaking on pensions specifically, Selby said it was ‘clearly not desirable that some savers feel forced to take decisions based on rumour and speculation rather than their long-term retirement goals’.
‘Reeves should use her budget to nip this issue in the bud by pledging not to make major changes to either pension tax relief or tax-free cash. This ’Pensions Tax Lock’ would send a clear signal to savers that the goalposts won’t be moved and should give people more confidence to take decisions based on their long-term interests,’ Selby added.
Meanwhile, in local data, numbers from the Office for National Statistics on Tuesday showed that the UK jobless rate faded to 4.0% in the three months to August, from 4.1% in the three months to July. The latest figure compared to FXStreet-cited consensus of 4.1%.
However, average earnings excluding bonuses rose 4.9% in the three months to August, cooling from 5.1% in the three months to July. Annual growth in total earnings, so including bonuses, was 3.8%. Growth in earnings including bonuses eased from 4.0% in three months to July.
Separate estimates indicated the number of payrolled employees rose by 0.4% in September, when compared with the same month a year prior. Provisional figures indicate that median monthly pay increased by 5.3% in September when compared with a year prior.
In European equities on Tuesday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was up 0.2%.
Eurozone industrial production returned to growth in August, according to official data on Tuesday.
Eurostat said industrial production expanded by 1.8% month-on-month in the eurozone, having shrunk 0.5% in July. The strongest growth was a 3.7% expansion in capital goods. By country, Germany saw robust growth of 3.3%.
Compared to the prior year, industrial production was up 0.1% in August, having slumped 2.1% in July.
The European Central Bank is expected to lower interest rates again this week, as anxiety about inflation in the eurozone fades and concerns over sluggish growth mount.
Inflation fell to 1.8% across the 20 members of the euro area in September, the first time it has been below the ECB’s target of two percent since 2021. While the rate is expected to tick up again towards the end of the year, the sense that consumer prices are back under control has grown.
Meanwhile, separate data from Destatis showed that wholesale prices in Germany decreased monthly and annually in September, falling short of the consensus forecast.
Selling prices in wholesale trade decreased 1.6% compared with September 2023, and decreased 0.3% compared with August. This underperformed against FXStreet-cited consensus, which had pencilled in a 0.2% rise on a monthly basis.
In August, Destatis reported, prices fell 1.1% on-year, having edged down just 0.1% in July.
Destatis said mineral oil products were the main contributor to the on-year decrease in September, with their wholesale prices dropping 15% annually and by 4.5% from the prior month.
The pound was quoted at $1.3079 at midday on Tuesday in London, up compared to $1.3052 at the equities close on Monday. The euro stood at $1.0913, higher against $1.0910. Against the yen, the dollar was trading at JP¥148.91, down compared to JP¥149.83.
In London’s FTSE 250, Bellway gained 6.7%.
For the year ended July 31, the construction firm reported pretax profit of £183.7 million, down 62% from £483.0 million a year prior. Revenue fell 30% to £2.38 billion from £3.41 billion.
Accordingly, Bellway slashed its total dividend to 54.0 pence from 140.0p the previous year.
Nevertheless, the firm remained positive on its order book forecast, with the book totalling 5,144 homes, up from 4,411 year-on-year. Order book value on July 31 was £1.41 billion, up from £1.19 billion the year before.
Bellway is targeting at least 8,500 homes in financial 2025, up from 7,654 in financial 2024.
Elsewhere, De La Rue jumped 13%.
Its wholly owned subsidiary, De La Rue Holdings, has agreed to sell the group’s authentication division to Crane NXT and its related entities for a cash consideration representing an enterprise value of £300 million. Of this, 5% will be held in escrow for up to 18 months following completion.
Proceeds will go towards repaying De La Rue’s existing revolving credit facility in full and reducing leverage to a net cash position; and reducing the deficit on the group’s legacy defined benefit pension scheme by paying £30 million as an accelerated contribution on completion. The transaction is expected to complete in the first half of 2025.
Meanwhile, Applied Nutrition set the price range for its planned initial public offering at 136 to 160 pence per share, implying an estimated market capitalisation at admission of between £340 million and £400 million.
The offer comprises up to 137.4 million existing shares to be sold by certain existing shareholders of the company.
Stocks in New York were called mainly lower. The Dow Jones Industrial Average was called up 0.1%, but the S&P 500 index was called down 0.1%, and the Nasdaq Composite down 0.2%.
The US Federal Reserve should be more careful with its pace of rate cuts than it was in September, a senior bank official said, pointing to ‘disappointing’ recent inflation data.
Federal Reserve Governor Christopher Waller told a conference in California, the latest inflation figures were ‘disappointing,’ according to prepared remarks.
A Labor Department report last week showed US consumer inflation cooled in the year to September, but a measure stripping out volatile food and energy costs rose slightly. Economic growth and employment, however, have remained strong despite the Fed’s elevated interest rates.
Meanwhile, in politics, Democratic presidential candidate Kamala Harris is set to give her first interview to the conservative television channel Fox News, less than three weeks before the US presidential election on November 5.
The conversation with moderator Bret Baier is scheduled to air on Wednesday evening at 2200 GMT, the channel announced. It will take place in the battleground state of Pennsylvania.
At a rally in Erie, the most evenly-divided of Pennsylvania’s counties, the Democrat VP played a video montage of Trump calling for the jailing of political opponents and repeatedly referring to ‘the enemy from within.’
It included a weekend interview on Fox News in which Trump suggested ‘sick people, radical left lunatics’ could be ‘very easily handled’ by the military under a Trump administration.
Harris said Trump would persecute groups he has targeted before, including journalists, election officials and judges who ‘insist on following the law, instead of bending to his will.
Brent oil was quoted at $73.48 a barrel at midday in London on Tuesday, down from $77.19 late Monday.
Gold was quoted at $2,654.80 an ounce, up against $2,646.29.
Still to come on Tuesday’s economic calendar, there is the New York empire state manufacturing index and the Redbook index from the US.
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