London’s blue-chips retreated on Tuesday ahead of key UK inflation data, which could show whether hopes for a spring interest rate cut from the Bank of England are too optimistic.
Investors are also re-assessing whether the conviction that US interest rates will be cut in March is realistic, or wide of the mark. US rate cut bets have dwindled, though a cut in March is still the most likely outcome for now.
The FTSE 100 index closed down 36.57 points, 0.5%, at 7,558.34. The FTSE 250 fell just 7.52 points to 19,193.32, and the AIM All-Share ended up 0.44 of a point, 0.1%, at 747.81.
The Cboe UK 100 ended down 0.5% at 754.52, the Cboe UK 250 rose 0.2% to 16,643.20, and the Cboe Small Companies lost 0.5% at 14,985.53.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.2%, while the DAX 40 in Frankfurt lost 0.3%.
In New York, the Dow Jones Industrial Average was down 0.5%, the S&P 500 lost 0.1%, while the Nasdaq Composite edged up 0.1%.
The pound was quoted at $1.2676 at late Tuesday in London, lower compared to $1.2734 at the equities close on Monday. The euro stood at $1.0894, down against $1.0950. Against the yen, the dollar was trading at JP¥146.81, higher compared to JP¥145.77.
‘Bets on a [Fed] rate cut in March have been fizzling out as the US economy continues to show a resilience that gives the Federal Reserve headroom to keep rates high for longer, in a dynamic that, helped by global geopolitical instability, supports the dollar gains in relation to other major currencies,’ ActivTrades analyst Ricardo Evangelista commented.
According to the CME FedWatch Tool, there is roughly a 73% chance that the Fed cuts rates in March. Though still the most likely outcome, that probability dwindled from over 80% a day earlier.
Eyes are also on the eurozone interest rate outlook. The European Central Bank announces its first interest rate decision of the year on January 26.
Analysts at ING commented: ‘The euro is not exactly showing it, but we have started to see some aggressive push-back from European Central Bank hawks against the 150bp of easing expectations priced in by the markets this year. Both Joachim Nagel and Robert Holzmann warned that rate cuts are not guaranteed this year.’
In London, Experian climbed 2.3%. The credit checking company said total revenue was up 9% in the three months that ended December 31, or 7% at constant exchange rates, with organic growth up 6%.
In North America alone, which accounts for 67% of the group’s total revenue, Experian reported a 6% increase at actual currency rates.
At actual rates, revenue in the UK & Ireland unit rose 9%, and in the Europe, Middle East, Africa & Asia Pacific division, it rose 8%.
These figures were at the ‘upper end’ of Experian’s expectations, said Chief Executive Officer Brian Cassin.
Rightmove shares fell 4.3%. JPMorgan cut the property portal to ’underweight’ from ’neutral’ on Tuesday. The stock has fallen almost 10% since CoStar Group sealed its acquisition of Rightmove rival OnTheMarket.
Under new ownership, OnTheMarket has already looked to make waves in the real estate agency sector. It said Tuesday it has struck a deal which will see Leaders Romans Group advertise its residential sales and lettings properties on the OnTheMarket portal.
Elsewhere in London, Spirent Communications shares surged 11%. It said its 2023 results were in line with its revised expectations despite ‘a challenging year’.
The automated test and assurance solutions provider said full-year revenue closed at $474 million, down 22% from $607 million a year earlier.
Spirent expects to report an adjusted operating profit in line with the market consensus of $45 million, within a range of $37 million to $50 million. Adjusted operating profit in 2022 was $129.5 million, so another substantial annual fall.
THG shares jumped 7.0%. It reported lower revenue in the fourth quarter of last year, but it expects a jump in annual profit and celebrated a new partnership with a long-established health food store chain.
The Manchester-based e-commerce platform said revenue fell 7.1% annually to £607.8 million in the fourth quarter of 2023.
For all of 2023, revenue was down 8.7% to £2.04 billion from £2.24 billion in 2022.
Despite the revenue decline, THG expects 2023 continuing-operations adjusted earnings before interest, tax, depreciation and amortisation of more than £117 million, up 32% from £88.9 million in 2022, and for group adjusted Ebitda to jump 75% annually from 2022’s £64.1 million.
THG also announced new and expanded partnerships with Holland & Barrett via THG Ingenuity, which it said will contribute around £175 million to gross merchandise value during 2024.
Shares in Superdry fell sharply after Sky News reported the clothing retailer has enlisted one of the big four accountancy firms to advise on its finances in the wake of a pre-Christmas profit warning.
Superdry, founded by Julian Dunkerton, has appointed PricewaterhouseCoopers to examine its debt-raising optionsm, Sky News said.
In December, the Cheltenham, Gloucestershire-headquartered clothing retailer, warned its profit for its current financial year ending at the end of April will suffer amid the ‘well-documented challenging trading environment’.
The stock slumped 15% on Tuesday.
Brent oil was quoted at $78.10 a late Tuesday afternoon in London, largely flat from $78.09 late Monday. Gold was quoted at $2,038.07 an ounce, down against $2,053.53.
Wednesday’s economic calendar has a Chinese gross domestic product reading overnight, before inflation data from the UK at 0700 GMT and the eurozone at 1000 GMT. There are US retail sales at 1330 GMT.
The local corporate calendar has trading statements from bookmaker 888, miner Antofagasta and food delivery firm Just Eat Takeaway.com.
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