Stock prices in Europe fell on Tuesday morning, with the mood in equities nervy ahead of a US consumer price inflation print in the afternoon and after a UK unemployment reading earlier in the morning.
The UK data supported the pound, but hit equities, as it strengthened the case for the Bank of England to keep rates higher for longer.
The FTSE 100 index traded 11.92 points lower, 0.2%, at 7,561.77. The FTSE 250 was down 68.36 points, 0.4%, at 19,135.57, though the AIM All-Share edged up 0.25 of a point to 750.43.
The Cboe UK 100 fell 0.2% to 755.86, the Cboe UK 250 dropped 0.3% to 16,573.00, and the Cboe Small Companies was flat at 14,391.72.
The CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was 0.4% lower.
The pound was quoted at $1.2644 early Tuesday, up from $1.2621, where it stood at the time of the London equities close on Monday.
The UK unemployment rate was lower than expected in the last three months of 2023, and growth in earnings was more robust than forecast, data showed.
According to the Office for National Statistics, the jobless rate faded to 3.8% in the three months to the end of December from 4.2% in the period from September to November. Unemployment had been expected to ease slightly less, to 4.0%, according to FXStreet-cited market consensus.
Annual growth in regular earnings, so excluding bonuses, amounted to 6.2% in the three months to December. Including bonuses, earnings rose 5.8% on-year.
Pay growth was hotter than expected by both measures. Earnings including bonuses had been expected to rise by 5.6%, according to FXStreet, while excluding bonuses, a rise of 6.0% was forecast.
‘With unemployment a touch lower than expected and annual wage growth a touch higher, the UK labour market is proving stronger than economists had expected. However, the high temperature of the UK labour market could be down to ill-health rather than a sign of peak physical fitness,’ Wealth Club analyst Nicholas Hyett commented.
‘A growing proportion of the UK workforce, more than one in five, is economically inactive, with an historically high number signed off long-term sick. A shrinking workforce is increasing demand for those workers who are available and pushing up wages. Good news for those in work, but not so positive for the economy as a whole.’
The next batch of UK unemployment data is scheduled for March 12, so before the Bank of England’s next decision on March 21.
On Wednesday, the ONS reports UK inflation data for January. Annual consumer price inflation is expected to have picked up to 4.2% last month from 4.0% in December, according to FXStreet.
The hotter than expected labour market data, which potentially dampens Bank of England rate cut hopes, hit shares in housebuilders. Barratt Developments fell 1.2%, among the worst large-cap performers. Taylor Wimpey lost 1.1%.
The euro traded at $1.0766 early Tuesday, largely flat against $1.0769 late Monday. Versus the yen, the dollar bought JP¥149.65, rising from JP¥149.44.
The afternoon’s main event will be the US inflation data at 1330 GMT. Annual consumer price growth is expected to have ebbed to 2.9% last month, according to FXStreet, from 3.4% in December.
Analysts at ING commented: ‘We’re expecting core [month-on-month] US CPI inflation to be in line with the consensus of 0.3%, but our economists say it could be lower. If so, a declining real policy rate would be increasingly hard to justify should the American economy start to cool.’
Back in London, Tui shares rose 3.6%. It reported a ‘record’ performance in its financial first quarter, including its first-ever underlying profit in the traditionally slow period for travel operators.
Its pretax loss narrowed to €103.1 million in the three months that ended December 31 from €272.6 million a year before, as revenue rose by 15% to a ‘record’ €4.30 billion from €3.75 billion.
Underlying earnings before interest and tax were €6.0 million, swung from a €153.0 million Ebit loss a year before.
Tui is holding its annual general meeting on Tuesday, at which shareholders will be asked to approve its plan to delist from the London Stock Exchange, while upgrading to a ’Prime Standard’ listing in Frankfurt with inclusion on the MDAX index of German mid-cap stocks. The plan, announced early last month, is to achieve ‘centralisation of liquidity’ for Tui shares.
MediaZest shares surged 17% after it said it has won a ‘large’ new deal with a UK-based customer. The audiovisual solutions provider said the customer is a ‘FTSE listed client’.
The deal is worth £200,000 and will see MediaZest ‘provide digital signage solutions for multiple workspace locations’ over a two-year period.
Brent oil was quoted at $82.22 a barrel, rising from $81.69. Gold rose to $2,025.07 an ounce from $2,013.55.
Swissquote analyst Ipek Ozkardeskaya commented: ‘Aramco says it sees robust global oil demand this year, Opec and IEA will release their own predictions today and Thursday respectively. Of course, the predictions from Opec should be expected to be rosier than the reality – because they have all the interest in the world to fuel oil prices – but the strong US growth and decent Chinese stimulus are indeed positive for the supply-demand dynamics.
‘However, note that rising oil prices are a double-edged sword. Good growth is positive for oil prices, but higher oil prices are not good for easing inflation. Hence, any U-turn in inflation would get the major central banks to further tighten their purses’ strings, hit growth prospects and hammer a potential oil rally.’
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